OSFI puts capital hike on hold, indefinitely

Today, that one-year delay was extended indefinitely.

Peter Routledge, Superintendent of Financial Institutions, announced in statement that OSFI is deferring increases to the output floor “until further notice.”

For now, the output floor will remain at 67.5%, OSFI said, and it pledged to give banks at least two years advance warning before increasing the floor.

Previously, OSFI planned to raise the floor to 70.0% this year, and to 72.5% in 2026. The one-year delay pushed those planned increases back to fiscal 2026 and 2027, respectively.

Last week, the body that oversees global banking regulators said that they “unanimously reaffirmed” expectations that the final Basel III rules — which were developed to boost capital standards in the wake of the financial crisis — will be fully implemented.

However, OSFI said on Wednesday that “there remains uncertainty about when other jurisdictions will fully implement Basel III” — and so, it is now going to wait until the rest of the world’s regulators are prepared to adopt the final requirements in their jurisdictions before it tightens expectations on Canadian banks.

In recent months, regulators in the U.S., the U.K., and Europe have backed away from final implementation of the Basel III requirements.

OSFI, which has already adopted most of the final reforms, continued to endorse the regime.

“The Basel III capital framework will strengthen banks’ ability to withstand financial shocks and support economic growth while enabling them to compete and take reasonable risks. Key to these reforms’ success is full, timely, and consistent adoption and implementation across BCBS jurisdictions so that competitive balance prevails throughout the international banking system,” Routledge said.

The regulator also signalled that it will take other action to ensure the stability, and competitiveness, of the Canadian banking industry, including adjusting capital buffer requirements, if necessary.

“We will monitor closely developments in Canada’s financial system, as well as the broader economic environment, and adjust to prevailing conditions,” he said.