OSFI introduces draft frameworks to strengthen Canada's financial system

Office seeks public input on proposed measures for D-SIBs and international life insurance groups

OSFI introduces draft frameworks to strengthen Canada's financial system

The Office of the Superintendent of Financial Institutions (OSFI) has announced the release of two draft frameworks, open for public consultation until June 30, 2023, which aim to enhance the stability of Canada's financial system.

These frameworks include the Parental Stand-alone (Solo) Total Loss-Absorbing Capacity (TLAC) Framework for Domestic Systemically Important Banks (D-SIBs) and the Parental Stand-alone (Solo) Capital Framework for internationally active life insurance groups.

Unlike previous guidelines that focused on consolidated operations, these solo frameworks specifically evaluate the loss-absorbing capacity of the Canadian parent bank or parent operating life insurer.

This approach allows OSFI to assess the individual financial strength of the parent and its ability to act as a source of support for its subsidiaries and branches.

The implementation of these frameworks adds an extra layer of protection for depositors, policyholders, and creditors, complementing the existing TLAC and capital guidelines for D-SIBs and life insurers respectively on a consolidated group basis.

Stakeholders and the public are encouraged to provide feedback on the draft frameworks by submitting their comments to [email protected] before the deadline. OSFI will then evaluate the input received and plans to issue final frameworks later this year.

"These new frameworks, aligned with international best practices, are aimed at helping us better ensure that Canadian banks and life insurers operating overseas are managing risks appropriately, protecting their depositors, policyholders, and creditors," said Peter Routledge, superintendent of financial institutions. "We look forward to hearing from our stakeholders on this important initiative."

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