OSFI has announced that deposit-taking institutions can use their Pillar II capital buffers to absorb unexpected losses arising from the impact of the COVID-19 disruption.
This flexibility, the regulator hopes, will assist financial institutions to continue supporting Canadians and Canada-based businesses through these extraordinary times.
OSFI expects these institutions to concurrently consider the appropriateness of their capital management actions.
Specifically, financial institutions’ ongoing assessment and consideration should address the following:
i) In cases where financial institutions are using their capital buffers, they should use the capacity prudently and consider appropriate capital conservation actions. An institution should also have a plan for how it expects to manage its risks and restore capital.
ii) Financial institutions should consider stress testing information (including plausible future adverse scenarios) as part of the capital management decision-making process.
iii) Financial institutions must ensure that they undertake prudent capital management actions to protect depositors and other creditors while taking reasonable risks.
Additional details are available here.
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