Backgrounder: Liquidity Adequacy Requirements - Guideline (2025)

Overview

The Liquidity Adequacy Requirements (LAR) Guideline helps ensure federally regulated banks, bank holding companies, and trust and loan companies can support deposit withdrawal as well as meet payment and settlement obligations, even during challenging times.

The LAR Guideline has been in place since 2015 and is consistent with the international Basel Committee on Banking Supervision’s Basel III reforms. The Office of the Superintendent of Financial Institutions’ (OSFI) objective is to ensure that the LAR Guideline remains comprehensive, fit-for-purpose, and that the requirements reflect the underlying risk.

Key changes in the final 2025 LAR guideline

• Intraday liquidity - Updates to the monitoring tools used to address intraday liquidity risk, which is the risk that on a given day a bank will be unable to meet a payment obligation at the time expected, helping OSFI better assess risk.
• Intraday liquidity regulatory return: Introduction of a new regulatory return that will help monitor whether institutions that are direct clearers of Canada’s Large Value Payment System (Lynx) can meet their payment and settlement obligations even during challenging times.
• Bankers’ Acceptances (BA): Updates to the treatment of BAs to align with their obsolescence resulting from the discontinuation of the Canadian Dollar Offered Rate (CDOR) benchmark in June 2024.

Why it’s important

Increased risks in the financial system are highlighting the importance of monitoring intraday liquidity. Intraday liquidity risk affects not only the bank’s own liquidity but also that of third parties, and could result in additional borrowing costs, loss of stakeholders’ trust, and disruption to payments, settlements and clearings.

OSFI is enhancing its liquidity regime to meet international standards and to continue to ensure the resiliency of Canada’s financial system.

The final guideline incorporates lessons learned from stakeholder feedback from the public consultation and recent liquidity risk events in the banking sector in the United States and Europe and they are consistent with international peer practices.

Links to other OSFI guidelines

Some revisions were made to the Small and Medium-Sized Deposit-Taking Institutions (SMSBs) Capital and Liquidity Requirements – Guideline. This is required whenever there are changes to the LAR Guideline or the Capital Adequacy Requirements (CAR) Guideline.

Effective date

The final LAR Guideline (2025) comes into effect on April 1, 2025. The Intraday Liquidity Regulatory Return will be published in April 2025 and implemented in November 2025.