The NSFR is one of the Basel Committee’s key reforms to promote a more resilient banking sector. Under NSFR, Banks are required to hold a minimum amount of assets that can provide stable funding in the event there is disruptions to a bank’s regular funding sources that could lead to a bank failure and potentially pose a systemic risk. NSFR has an international implementation date of January 2018, however, the Office of the Superintendent of Financial Institutions (OSFI) had announced a domestic implementation date of January 2019. The IIAC wrote to OSFI on multiple occasions requesting that implementation be further delayed. An area of considerable attention by IIAC members has been the potential effects of the NSFR on the functioning of collateral markets and, by extension, the broader financial system.
In a February 6, 2018 letter, OSFI indicated that based on implementation progress at the international level, it will target a revised NSFR implementation date for Canadian deposit-taking institutions of January 2020—a win for the IIAC.
A delay in implementation will allow: i) OSFI the opportunity to undertake additional consultations with stakeholders to ensure domestic implementation is appropriately calibrated for the nuances of the Canadian market, and ii) market participants will have more time to digest the NSFR requirements and incorporate changes into their business/operational practices.