Canada’s banks are in increasingly close contact with governments and regulators about contingency plans to prepare the financial sector to withstand potential outbreaks of COVID-19.
Although banks have focused on updating and testing their own business continuity plans, conversations with the banking regulator – the Office of the Superintendent of Financial Institutions (OSFI) – have become more frequent than usual. So have high-level calls between bank executives and the Finance Ministry, according to sources familiar with the discussions, who The Globe and Mail is not identifying because they are not authorized to speak about the talks publicly.
Banks’ planning in the early days of the new coronavirus – which causes a disease called COVID-19 – focused on minimizing unnecessary business travel, restricting in-person meetings and attendance at large gatherings such as conferences and testing systems to make sure they could handle large numbers of employees logging in remotely.
It is not clear if the banks plan to implement any new measures in branches.
Each of Canada’s largest banks has tens of thousands of employees in multiple countries, and executives and risk officers have to ready themselves for more drastic measures, if necessary. Those could include splitting up teams to reduce the risk of contagion in any one of the bank’s functions. At Toronto-Dominion Bank, a plan to move some staff and infrastructure from open-concept trading floors to smaller, separate sites has been discussed, but not yet implemented, according to sources. All banks have back-up sites at remote locations stocked with enough trading desks and computers to keep crucial operations running.
Bankers must also gauge the risks to their credit books by combing through lending files to identify clients and industries that could be most vulnerable to the economic effects of the outbreak, and that may need the bank’s support to avoid defaulting on loans.
As banks test, practise and revise those plans, regulators are stepping up their monitoring to make sure they are sufficient to keep the financial system stable. “Given the virus outbreak, OSFI determined it was prudent to understand the steps that they are taking to address this risk,” Michael Toope, a spokesperson for the regulator, said in an e-mail. “OSFI supervisors are increasing their communication with institutions and are reviewing their plans for responding to possible impacts of COVID-19.”
Banks also share information with each other through the Canadian Bankers Association (CBA), an advocacy group that serves as a gathering place for financial institutions large and small. “Each CBA member institution has its own protocols which reflect the specific nature of that bank’s business, global footprint and employee composition,” CBA spokesperson Mathieu Labrèche said.
So far, no single group has been formed to bring the banks together with government officials, regulators, the Bank of Canada and other agencies to co-ordinate a response. But as it reviews banks’ business continuity plans, OSFI “works closely with its federal financial partners,” Mr. Toope said.
The most stringent restrictions banks have put in place to date are mostly on business travel. Royal Bank of Canada has advised staff to defer travel to Hong Kong, mainland China and other areas hardest hit by the virus. And other banks, such as Canadian Imperial Bank of Commerce and National Bank of Canada, now require a senior manager to approve non-essential travel.
TD Bank, which had already restricted travel to areas severely affected by the virus, tightened travel limitations on Wednesday in a memo to all staff sent by executive vice-president of human resources Kenn Lalonde and reviewed by The Globe. The new protocols ask staff to minimize discretionary travel in Canada and the United States, and restrict all travel beyond those countries without special authorization from a top executive.
“We are confident these precautions are the appropriate steps at this time,” Mr. Lalonde told TD staff in the memo.
TD also requires employees who have been at high risk of exposure to the virus to stay away from the bank’s workplaces for specific periods of time. And at HSBC Canada, which has restricted travel to some destinations, staff returning from those places must self-quarantine, according to spokesperson Sharon Wilks. HSBC Group PLC, the U.K.-based parent bank, does business in 64 countries and has an extensive footprint in Asia.
Yet all of those restrictions will be tested by the coming March break, when large numbers of bank employees and their families have plans to travel for the school holiday.
With a report from Rita Trichur
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