Friday, October 24th11.4°C
23711
22501

Canada's banks will follow new Basel leverage standard, says regulator

TORONTO - Canada's banking regulator says it will require the domestic industry to adopt a new leverage standard soon to be used by other banks around the world.

Starting next year, the Office of the Superintendent of Financial Institutions will begin following a leverage ratio created by the Basel committee on banking oversight.

Under the Basel III leverage ratio, a Canadian bank will be required to have capital that is at least three per cent of its total assets — which is down from a longtime practice of five per cent.

The new calculation, however, is "more complex" than the asset-capital multiple (ACM) used by Canada's banking industry for more than two decades, said OSFI deputy superintendent Mark Zelmer.

The Basel III standard is "designed to look through differences in accounting rules across jurisdictions so that bank leverage data can be compared on an 'apples to apples' basis across banks," he said in prepared remarks presented at a Toronto banking conference on Tuesday.

The OSFI has a long-standing assets-to-capital requirement that meant Canadian banks could not hold assets that exceeded 20 times their capital reserves — or five per cent.

New requirements in the Basel III calculation are more strict for banks and include more off balance sheet derivatives and a narrower definition of capital, which holds it to a higher standard of Tier 1 capital, Zelmer said.

But Canada does not plan to follow the United States, which is in the process of laying out a stricter leverage ratio that exceeds the Basel standard.

"(We) will continue to set more stringent requirements on an institution-by-institution basis as circumstances warrant," Zelmer said.

Canadian banks will be required to follow the international standards beginning in January 2015, he said. Details on the new leverage guideline will be released later this year.

The Basel committee created the Basel III standards in response to the recent global financial crisis. The intention of the voluntary regulations is to set a standard on key measures of a bank's health and its ability to endure future economic downturns.

Canadian banks have been widely considered a model for international banks because they weathered the global recession better than others.

The Canadian Press


Read more Business News

23433


Recent Trending




Today's Market
S&P TSX14543.82+56.99
S&P CDNX805.45-3.15
DJIA16805.41127.51
Nasdaq4483.715+30.923
S&P 5001964.58+13.76
CDN Dollar0.8901-0.0003
Gold1231.20+2.10
Oil81.02-0.73
Lumber336.40+6.80
Natural Gas3.631+0.009

 
Okanagan Companies
Pacific Safety0.105-0.005
Knighthawk0.01-0.005
QHR Technologies Inc1.15-0.02
Cantex0.07+0.015
Anavex Life Sciences0.194-0.004
Metalex Ventures0.045+0.005
Russel Metals33.39+0.23
Copper Mountain Mining2.03-0.05
Colorado Resources0.145+0.005
ReliaBrand Inc0.012-0.001
Sunrise Resources Ltd0.05-0.01
Mission Ready Services0.445+0.035

 





FEATURED Property
2089049Triplex with basement suite
$315,000
more details
image2image2image2
Click here to feature your property
Please wait... loading


What I learned in China

Photo: ContributedI will never be an expert on China. It is just too big, too complex and too old with layers of history and meaning that would take several lifetimes to unravel. As I said to my hosts...


We can get on together

I was in LA this week. I witnessed such crazy and unusual circumstances as I strolled along Hollywood Blvd and Sunset Blvd. A far cry from sleepy Peachland in the Okanagan! The strange thing was, I f...


Weakening global growth worries

The Big Picture Growth worries persist Worries about weakening global growth and its potential impact on the US economic recovery roiled markets around the globe this week. Europe continues to be the ...

_








Member of BC Press Council


22632