Canada’s OSFI delays increase of Basel III output floor by one year

The Office of the Superintendent of Financial Institutions (OSFI) announced a one-year delay to the increase of the capital floor level, also called the output floor. Canada concluded its implementation of Basel III 2017 reforms in early 2024 and established a three-year phase-in of the capital floor consistent with the timetable set by the Basel Committee on Banking Supervision (BCBS).

The purpose of the capital floor is to reduce excessive variability and to enhance comparability of risk-based capital ratios. The capital floor requires that risk-weighted-assets generated by internal model-based approaches cannot, in aggregate, fall below a percentage of the risk-weighted assets computed by the standardized approach.

Global implementation of the capital floor has been a lengthy process. The one-year delay will give OSFI time to consider the implementation timeline of the Basel III 2017 reforms in other jurisdictions.

Peter Routledge, superintendent of Financial Institutions, said in a statement: “The Basel III 2017 reforms 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.

“We will continue to measure implementation progress of the Basel III 2017 reforms across jurisdictions with a focus on both competitive balance in banking and the soundness of Canada’s capital regime.”


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