The Financial Post reports in its Friday edition that in a surprise move, the Office of the Superintendent of Financial Institutions raised the amount of capital Canada's biggest lenders must hold to guard against risks to a record 2.5 per cent of risk-weighted assets, from 1 per cent currently.
A Reuters dispatch to the Post reports that the new measures, which take effect on Oct. 31, are a sign that the economic and market disruptions stemming from COVID-19 have abated and banks' capital levels have been resilient, the OSFI said.
However, the OSFI acknowledged that key vulnerabilities, including household and corporate debt levels, as well as asset imbalances caused by steep increase in home prices over the past year, remain. In a sign of concern about the housing market, OSFI and the Canadian government raised the benchmark to determine the minimum qualifying rate for mortgages, starting June 1.
The increase in the Domestic Stability Buffer to the highest possible level raises the Common Equity Tier 1 capital to 10.5 per cent of risk-weighted assets; a 4.5-per-cent base level, a "capital conservation buffer" of 2.5 per cent, and a 1-per-cent surcharge for systemically important banks, plus the DSB.
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