Canada bank watchdog toughens capital rule with risks rising
BNN Bloomberg
Canada’s banking regulator imposed higher capital requirements on the country’s largest banks for the second time in about six months, a signal of concern about risks building up in the financial system.
The Office of the Superintendent of Financial Institutions said it’s lifting the domestic stability buffer to 3.5 per cent of risk-weighted assets from its current 3 per cent level. The regulator increased it by the same amount in December.
The change means the six largest domestic banks will be required to hold Common Equity Tier 1 capital of at least 11.5 per cent of risk-weighted assets. All six are currently above that level. The new requirements come into effect Nov. 1.
“Current vulnerabilities, including high household and corporate debt levels, the rising cost of debt, and increased global uncertainty around fiscal and monetary policy, coupled with Canada’s financial sector showing strength throughout the winter and spring has presented the opportunity for OSFI to build more resiliency in the system,” the bank watchdog said in a statement.
