Canada’s banking watchdog raises key buffer for banks amid economic fears – National | 24CA News
Canada’s largest banks can be required to put aside more cash to cowl potential losses because the nation’s banking watchdog factors to rising fears of an financial downturn.
The Office of the Superintendent of Financial Institutions (OSFI), which regulates Canada’s largest lenders, introduced Tuesday it will increase the home stability buffer (DSB) to three.5 per cent, up from 3.0 per cent. The change will take impact Nov. 1, 2023.
The DSB dictates how a lot of a financial institution’s reserve funds have to be put aside to cowl potential losses; OSFI describes it as a “rainy-day fund” in paperwork on its web site. It applies to Canada’s six largest banks.
The DSB is one a part of an total capital requirement that huge banks should maintain always. With the DSB hike on Tuesday, the minimal quantity banks will need to have on-hand will rise to 11.5 per cent of their whole property; OSFI says that as of April 30, banks’ precise ranges had been 13.1 per cent.
This marks the second consecutive improve to the important thing buffer, which additionally rose by 50 foundation factors at OSFI’s December 2022 announcement.
OSFI head Peter Routledge mentioned in a press convention Tuesday morning that “financial system vulnerabilities remain elevated and in some cases have continued to increase.”
“OSFI is buying more insurance for financial stability,” he mentioned.
More to come back.
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