Fears about new global capital rules are overblown, top bank regulator says
Canada’s chief banking regulator says fears about lopsided implementation of post-financial-crisis capital rules and dire warnings about curtailed lending and hits to the Canadian economy are overblown.
In a speech at a conference Wednesday in Toronto, Peter Routledge, head of the Office of the Superintendent of Financial Institutions, said that contrary to the prognostications, new capital floor rules are not expected to have a material impact on capital at the country’s largest six banks.
“Based on our estimates, the implementation of the 2017 Basel III reforms in Canada is expected to be capital neutral,” Routledge, OSFI’s superintendent, told the audience at the Global Risk Institute’s Summit 2024.
He said the final Basel capital rules, sometimes referred to as Basel Endgame, are attracting unusual attention, both at home at in other countries, some of which are either delaying implementation or watering down provisions agreed to eight years ago.
As a result of the uncertainty, OSFI announced it would delay by one year its final implementation of the capital floor rules, which are aimed at ensuring internal risk models at the banks don’t stray too far from a standardized approach.
“We were not alone in attracting this attention,” Routledge said. “In a neighbouring country, earlier this year one could find a great deal of public attention on the 2017 Basel III reforms, most peculiarly on television advertisements and airport billboards.”
A flurry of lobbying in the United States appeared to pay off for banks there, with the United States Federal Reserve signalling last month that it is considering cutting previously announced increases for bank capital cushions in half.
Still, Routledge noted in his speech, a
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