Canada’s banking regulator is giving financial institutions more flexibility on requirements such as capital buffers and filing deadlines to help banks, pension funds and insurers cope with the fallout of COVID-19.
The Office of the Superintendent of Financial Institutions announced the measures on Friday afternoon “to help reduce some of the operational stress on institutions.”
To assist banks that are allowing hard-hit customers to delay mortgage payments by up to six months, the OSFI said it will treat these deferred mortgages as performing loans for the sake of calculating the risk-weighted assets on a bank’s balance sheet.
The OSFI is also allowing banks to pledge more of their assets against covered bonds – raising the limit from 5.5 per cent of assets to 10 per cent of assets. And the regulator encouraged banks to dip into capital buffers that they’ve built up above the minimum levels required by regulation.
“These buffers are held in normal times to help ensure that an institution has additional flexibility in times of stress,” the OSFI said in a statement.
This comes two weeks after the OSFI cut domestic stability buffer requirements by 1.25 per cent, freeing up an estimated $300-billion worth of lending capacity.
To help insurers, the OSFI said it is suspending semi-annual progress reporting on the implementation of new accounting standards. While for private pension funds, the OSFI said it is freezing portability transfers and annuity purchases relating to defined-benefit provisions of pension plans.
“Transfers and annuity purchases are being prohibited at this time to protect the benefits of plan members and beneficiaries, given that current financial market conditions have negatively affected the funded status of pension plans,” the OSFI said.