Canada raises capital requirement for domestic banks to 2%

(Reuters) - Canada’s bank regulator, the Office of the Superintendent of Financial Institutions, on Tuesday raised the capital requirement level for ‘systemically important’ banks in the country by 25 basis points, to 2%.

The increased domestic stability buffer indicates the regulator's view that Canadian banks were still vulnerable to factors such as household indebtedness, asset imbalances and institutional indebtedness and hence, should hold more capital for emergencies.

U.S. banks, on the other hand, have seen some easing in capital level requirements since President Donald Trump took over in 2016.

The rule, effective October 31, will only be applicable to domestic systemically important banks, such as Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and Toronto-Dominion Bank.

The ‘systemically important’ companies are those whose failure can pose a threat to the global financial system.

Reporting By Aparajita Saxena in Bengaluru; Editing by Shinjini Ganguli