Top bank regulator halts Basel endgame implementation amid tariff uncertainty
Canada’s top bank regulator has indefinitely paused implementation of a key plank of the post-financial crisis reforms and is considering other relief measures to help banks manage any fallout from a trade war threatened by the United States.
In a surprise announcement Wednesday, the office of the Superintendent of Financial Institutions (OSFI) said it was indefinitely pausing an increase to the so-called Basel III output floor and would give Canadian banks at least two years notice before implementing the controversial change, which had already been deferred by a year from an initial implementation date in 2024 after other large jurisdictions failed to adopt the rules.
Further word on implementation of the final reforms in Canada wasn’t expected until summer.
In an interview Wednesday, OSFI superintendent Peter Routledge said that while uncertainty about whether the United States and Europe would adopt the final Basel rules informed the decision, tariffs threatened by U.S. president Donald Trump and the potential for an all-out trade war was a major factor.
“I’m talking about the uncertainty around what will happen as a result of potential … tariffs,” Routledge said.
“The prospect of them creates some economic uncertainty that could filter into the financial system so in those situations, our regulatory constituents, first and foremost, want clarity, long-term clarity about the future.”
He said OSFI is assessing a range of potential impacts of rising tariffs on banks, such as rising loan losses, and could make further adjustments to regulatory capital, liquidity and reporting requirements as was done in the early days of the COVID-19 pandemic, if necessary.
“We’re not predicting it, but we built all this resilience so
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