Canada’s OSFI ends sovereign debt exclusions from leverage ratio effective end-2021

OSFI confirmed that the exclusion of sovereign-issued securities from the leverage ratio exposure measure for deposit-taking institutions (DTIs), introduced at the outset of the COVID-19 pandemic, will not be extended past December 31, 2021.  Central bank reserves will continue to be excluded from the leverage ratio exposure measure for DTIs.

In April 2020, in response to the uncertainty caused by COVID-19, OSFI allowed the DTIs it regulates to temporarily exclude central bank reserves and sovereign-issued securities from their leverage ratio exposure measures. In November 2020, OSFI extended this temporary measure until December 31, 2021 to continue supporting the economy as it coped with the effects of the pandemic.

The decision to allow the temporary exclusion of sovereign-issued securities to expire is in line with previous OSFI decisions to discontinue other temporary relief measures introduced in response to COVID-19 when they are no longer credible, consistent, necessary and fit-for-purpose in the Canadian context. OSFI will closely monitor conditions and remains ready to take any further action, including the unwinding of other temporary measures, as required.

For specific guidance, please see the letter to industry issued to DTIs.

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