The Office of the Superintendent of Financial Institutions (OSFI) launched a 90-day consultation on proposed changes to its Liquidity Adequacy Requirements (LAR).
OSFI is seeking feedback on:
- proposed changes to intraday liquidity monitoring tools
- two new regulatory returns that federally regulated financial institutions (FRFIs) will need to complete and submit to OSFI on a monthly basis; and
- updates to the treatment of Bankers’ Acceptances in funding measurements.
The LAR Guideline helps OSFI determine if institutions have adequate liquidity. The proposed changes further address intraday liquidity risk – the risk that on a given day a bank will be unable to meet a payment obligation at the time expected. Intraday liquidity risk affects not only the bank’s own liquidity but also that of third parties, and could result in additional borrowing costs, loss of stakeholders’ trust, and disruption to payments, settlements and clearings.
These measures will allow OSFI to determine how well institutions manage their intraday liquidity risk and the introduction of the new regulatory returns will help monitor whether institutions can meet their payment and settlement obligations, even during challenging times.
These changes are based on lessons learnt from recent liquidity risk events and are consistent with international peer practices.