Office of the Superintendent of Financial Institutions defers further Basel III output floor increases and keeps it at 67.5%

The Office of the Superintendent of Financial Institutions (OSFI) announced it will defer further increases to the Basel III standardized capital floor (the “output floor”) until further notice, keeping the floor at 67.5%. OSFI also committed to notify affected banks at least two years before any future resumption of output floor increases. The output floor limits how far risk-weighted assets produced by banks’ internal ratings-based models can fall below risk-weighted assets calculated under the standardized approach. OSFI linked the pause to uncertainty about when other jurisdictions will fully implement Basel III, stating it does not intend to extend the implementation lead that Canada shares with a small number of peers, while maintaining its commitment to Basel III principles. OSFI said it will continue monitoring financial system and macroeconomic developments and remains prepared to adjust the Domestic Stability Buffer for Canada’s systemically important banks and capital expectations for small and medium-sized banks, including outside the usual June and December Domestic Stability Buffer setting cycle.