April 16 update: Canadian financial regulatory response to COVID-19

Office of the Superintendent of Financial Institutions (OSFI), Financial Services Regulatory Authority of Ontario (FSRAO), Autorité des marchés financiers (AMF), British Columbia Financial Services Authority (BCFSA), and Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) adjust regulations and guidance for banks, credit unions, financial intermediaries and other market participants.

16 April 2020

Canada's financial regulators have advised that they are reviewing and temporarily revising certain regulatory requirements for financial institutions and stakeholders during this time.

Our articles from March 19, 2020 and April 6, 2020 set out the key takeaways from the notices published to that date by these federal and provincial/territorial regulators.

Since the publication of those articles, there have been significant notices published by federal and select provincial financial services regulators. In this third article, we have compiled the key notices and set out links to the regulators' websites from up to and including April 14, 2020.[1]



The notices have been set out by the following sectors:

Banks

  1. OSFI's Updated Key Measures for Federally Regulated Banks

On April 9, 2020, OSFI announced a further series of regulatory adjustments to support the financial and operational resilience of federally regulated banks, publishing a detailed letter to the sector.

  • OSFI will provide various temporary exclusions to leverage ratio requirements so that banks are able to provide credit during this time.
    • This measure is effective as of April 9, 2020 and will remain in place until April 30, 2021.
  • OSFI has lowered the capital floor factor for banks that use the Internal Ratings Based approach to credit risk, from 75% to 70%, effective as of April 9, 2020.
    • OSFI expects the floor factor of 70% to stay in place until implementing the Basel III capital floor in Q1 2023.
  • OSFI has provided further guidance on the expected credit loss capital treatment and the associated regulatory reporting, laid out in its March 27 news release.
  • OSFI has published a revised version of Guideline E-22 Margin Requirements for non-centrally cleared derivatives to extend the deadline for banks to implement of the final two phases of the initial margin requirements for non-centrally cleared derivatives, by one year.
    • With this extension, the final implementation phase will take place on September 1, 2022.
  • OSFI has explained how the April 3 release by the Basel Committee on Banking Supervision will be implemented in Canada, to ensure they are fit for purpose in the Canadian context.
  • OSFI has also announced various regulatory filing extensions - for further details, please see the detailed letter to all federally regulated financial institutions.

Trust companies

  1. Filing Deadlines extended for BC Incorporated Trust Companies
  • On April 8, 2020 the BC Financial Services Authority (BCFSA) issued a notice advising that the deadline for filing of the Personal Information Return for BC Incorporated Trust Companies has been extended by 30 days. Personal Information Returns are generally required to be filed by each new director or senior officer before commencing duties. The administrative penalties that would normally apply have been waived.

Insurance

  1. OSFI's Updated Key Measures for Federally Regulated Insurers

On April 9, 2020, OSFI announced a further series of regulatory adjustments to support the financial and operational resilience of federally regulated insurers, publishing a detailed letter to the sector.

  • OSFI has advised that life insurers that grant loan payment deferrals due to COVID-19 will not be subject to increased capital charges for related mortgages, leases or other loans under the Life Insurance Capital Adequacy Test (LICAT).
    • This capital treatment will remain in place for the duration of the payment deferral, up to a maximum of six months. It may be applied for all cases related to COVID-19, even if they predate April 9, 2020.
    • OSFI has noted that life insurers granting these payment deferrals may be subject to additional reporting requirements.
  • Life, property & casualty, and mortgage insurers that approve premium payment deferrals will not be subject to increased capital requirements related to those deferred premiums.
    • This capital treatment applies to receivables from agents and brokers to the extent premiums flow through them.
    • It will remain in place for the duration of the premium payment deferral, up to a maximum of six months. It may be applied for all cases related to COVID-19, even if they precede April 9, 2020.
    • OSFI has noted that insurers granting these payment deferrals may be subject to additional reporting requirements.
  • OSFI will smooth LICAT interest rate risk requirements for par, over six quarters, to reduce increased volatility in required capital.
    • The interest rate risk requirement for a par block in any given quarter will be equal to the average of the current requirement for the block, and the requirements over the five previous quarters (i.e. the rolling average over six quarters).
  • OSFI has also announced various regulatory filing extensions - for further details, please see the detailed letter to all federally regulated financial institutions.
  1. Filing Deadlines Extended for BC Insurance Companies. .
  • The BCFSA has extended the deadlines for the following regulatory filings required to be made by BC insurance companies:
    • Personal Information Return: 30 day extension
    • World-wide Annual Financial Statements: 60 day extension
    • IFRS 17 Progress Reports: suspended until further notice

For further details, see the notice published April 8, 2020.

  1. AMF's Key Measures for Quebec Chartered Insurers

On March 31, 2020, the AMF again announced a series of regulatory adjustments designed to minimize the impacts of COVID-19 on the financial system in Quebec, along with a detailed notice for Quebec chartered insurers.

  • The AMF advised that life insurers that grant loan payment deferrals and deferrals on lease payments due to COVID-19 will not be subject to increased capital charges for related mortgages, leases or other loans under the Life Insurance Capital Adequacy Test (LICAT).
    • This capital treatment will remain in place for the duration of the payment deferral, up to a maximum of six months. It may be applied for all cases related to COVID-19, even if they predate April 9, 2020.
    • Insurers must continue to monitor the credit worthiness of these borrowers and lessees and adhere to sound credit risk management practices.
    • Life insurers granting these payment deferrals may be subject to additional reporting requirements.
  • Life and damage mortgage insurers that approve premium payment deferrals will not be subject to increased capital requirements related to those deferred premiums.
    • This capital treatment applies to receivables from agents and brokers to the extent premiums flow through them.
    • It will remain in place for the duration of the premium payment deferral, up to a maximum of six months. It may be applied for all cases related to COVID-19, even if they precede April 9, 2020.
    • Again, insurers granting these payment deferrals may be subject to additional reporting requirements.
  • The AMF agreed to extend the deadline for insurers to implement of the final two phases of the initial margin requirements for non-centrally cleared derivatives, by one year.
    • Consequently, its expectations with respect to the Guideline on margins for over-the-counter derivatives not cleared by a central counterparty have been adjusted.
    • With this extension, the final implementation phase will take place on September 1, 2022.
  • The AMF invited insurers to proactively consult with them about the financial and operational challenges they currently face due to COVID-19.

Pensions

  1. OSFI's Questions and Answers for Federally Regulated Private Pension Plans

On April 3, following OSFI’s announcement on March 27, 2020 to address issues stemming from COVID-19, OSFI published a series of questions and answers regarding the measures taken to protect pension plan members, former members and other beneficiaries.

  • OSFI has prepared 20 questions and answers, which are divided into three categories: (i) portability freeze, (ii) deadline extensions, and (iii) other measures.
  1. OSFI's Key Measures for Regulatory Reporting

On April 9, 2020, OSFI announced a further series of regulatory adjustments to support the financial and operational resilience of all federally regulated financial institutions, publishing a detailed letter to these entities.

  • OSFI has announced various regulatory filing extensions for all federally regulated financial institutions.
    • These measures include: (i) delays of changes to regulatory returns, (ii) granting extensions and not applying late filing penalties on a case-by-case basis, and (iii) issuing targeted ad-hoc reporting requests where information requested will assist in OSFI developing policy decisions for the industry.

Quebec MONEY-SERVICES BUSINESSES (MSB)

On April 9, 2020, the AMF announced regulatory relief designed to minimize the impacts of COVID-19 on the financial system in Quebec, and published a detailed notice for MSBs.

  • Current licensed MSBs and those applying for a license that will have difficulty paying their license fees can agree with the AMF to an additional delay to complete payment of the fees.

Quebec Financial Services Cooperatives, Trust Companies, and Savings Companies

On April 9, 2020, the AMF announced more regulatory relief designed to minimize the impacts of COVID-19 on the financial system in Quebec, publishing a detailed notice for Financial services cooperatives, trust companies and savings companies. That provides similar relief to the relief provided by OSFI for bank (please refer to comments above relating to the measures taken by Banks).

  • The AMF will provide various temporary exclusions to leverage ratio requirements to support the lending and intermediation activities of deposit-taking institutions and trust companies.
    • This measure is effective as of April 9, 2020 and will remain in place until April 30, 2021.
  • The AMF has lowered the capital floor factor for banks that use the Internal Ratings Based approach to credit risk, from 75% to 70%, effective as of April 9, 2020.
    • The AMF expects the floor factor of 70% to stay in place until implementing the Basel III capital floor in Q1 2023.
  • The AMF has provided further guidance on the expected credit loss capital treatment and the associated regulatory reporting based on measures published by the Basel Committee on Banking Supervision.
  • The AMF has agreed to extend the deadline for deposit-taking institutions and trust companies to implement of the final two phases of the initial margin requirements for non-centrally cleared derivatives, by one year.
    • Consequently, its expectations with respect to the Guideline on margins for over-the-counter derivatives not cleared by a central counterparty have been adjusted.
    • With this extension, the final implementation phase will take place on September 1, 2022.
  • The AMF previously announced an adjustment to regulatory capital for expected credit losses. also announced various regulatory filing extensions. In a separate notice the AMF provided guidance on the capital treatment and the regulatory reporting for deposit-taking institutions and trust companies.

Quebec Deposit Institutions

On April 9, 2020, the AMF announced more regulatory relief designed to minimize the impacts of COVID-19 on the financial system in Quebec, publishing a detailed notice for Deposit institutions and financial service cooperatives.

  • The AMF previously announced an adjustment to regulatory capital for expected credit losses. also announced various regulatory filing extensions. In this notice the AMF provided guidance on the capital treatment and the regulatory reporting for deposit institutions and financial service cooperatives with examples of increases and decreases in credit losses.

Conclusion

If you have any questions as to how these regulatory changes may impact your organization's obligations, please contact your Gowling WLG professional. Our Financial Services Regulatory Team at Gowling WLG will continue to keep you informed as further developments arise.

For other COVID-19 related resources, please visit our resource page with information to help clients manage their business during the pandemic. The page contains critical information to guide you through various complex legal issues, as well as a list of key contacts who can provide advice on these issues.


[1] Please note that while this article outlines some of the key takeaways from the notices published by the listed regulators up until April 14, 2020, it is not an exhaustive list or analysis. Please refer to the full notices on the regulators' websites for a complete list of the revisions.


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