Canadian regulator raises banks' domestic stability buffer to 3%
OTTAWA, Dec 8 (Reuters) - Canada's financial regulator said on Thursday it was raising the amount of capital the country's biggest lenders must hold as a stability buffer by 50 basis points to 3% of risk-weighted assets in response to rising economic uncertainty.
The Office of the Superintendent of Financial Institutions (OSFI) said persistent inflation and rising interest rates along with political tensions had exacerbated vulnerabilities.
The new 3% buffer level, which take effect from Feb 1, "reflects OSFI's observation that high levels of systemic vulnerabilities have persisted and, in some cases, increased in recent quarters," OSFI's Chief Risk and Strategy Officer Angie Radiskovic told reporters in a briefing.
OSFI also expanded the range in which it can set the buffer to between 0% and 4%, saying this would give it more flexibility to respond to economic risks.
Radiskovic said Canadian household indebtedness was rising and that highly indebted institutions were expected to be more vulnerable to economic shocks in a rising rate environment.
The Bank of Canada has raised interest rates at a record pace this year to fight inflation that is far above its target. On Wednesday, the bank increased its benchmark overnight interest rate by half a percentage point to 4.25%, a level last seen nearly 15 years ago.
Radiskovic said political uncertainty has increased the chance of a global slowdown that spills over into Canada, though near-term risks were stable and major Canadian lenders had performed well relative to their global peers.
Our Standards: The Thomson Reuters Trust Principles.
- BusinessReuters apologises over May 2022 Citi 'flash crash' article
Reuters said on Wednesday it accepted that an article it published on May 10 2022 could have been understood to mean that Ali Omari, then head of a trading unit at Citigroup in London, was personally involved in causing a "flash crash" which led to declines in European stock markets.