Regulator finalizes revisions to banks’ liquidity requirements

Federal banking regulators have issued final revisions to the liquidity and funding requirements for the big banks that aim to address the growth of higher risk deposits.

The Office of the Superintendent of Financial Institutions (OSFI) released the final version of its revisions to the liquidity rules that, among other things, tailor the requirements for less stable retail deposits. The rules now also include net stable funding ratio (NSFR) standards.

“Some institutions increasingly rely on deposit funding that may experience higher risk of withdrawals in periods of stress. Such funding models can amplify risks for both individual institutions and for the financial system at large,” the regulator said.

“To help mitigate this risk, OSFI has introduced targeted changes to the [liquidity rules’] metrics that better reflect the increased risks posed by different types of retail deposits that may be subject to sudden withdrawals,” it noted.

OSFI said the revisions aim to ensure that the rules properly capture banks’ liquidity risk. “The revised guideline will help financial institutions enhance their resiliency to short-term liquidity stresses, and will ensure that they maintain stable funding profile over the longer-term,” it said.

OSFI also released the final version of disclosure requirements for banks’ NSFR ratios, which aim to ensure that the big banks “provide clear and consistent disclosures regarding their funding risks.”

The revisions to the liquidity rules take effect Jan. 1, 2020. The NSFR disclosure requirements are to be implemented for quarterly reporting ending Jan. 31, 2021.

Staff

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