OSFI releases draft Solo frameworks for public consultation
News release - Ottawa -
Today, the Office of the Superintendent of Financial Institutions (OSFI) released two draft frameworks, open for public consultation until June 30, 2023, that will strengthen Canada’s financial system:
- Parental Stand-alone (Solo) Total Loss-Absorbing Capacity (TLAC) Framework for Domestic Systemically Important Banks (D-SIBs); and
- Parental Stand-alone (Solo) Capital Framework for internationally active life insurance groups.
The two solo frameworks focus on the loss-absorbing capacity of the Canadian parent bank or Canadian parent operating life insurer, rather than its entire, consolidated operations, allowing OSFI to assess the stand-alone financial strength of the parent and its ability to act as source of strength for its subsidiaries and branches.
These two draft guidelines complement OSFI’s existing TLAC and capital guidelines for D-SIBs and life insurers respectively on a group consolidated basis, providing an additional layer of protection to safeguard the rights and interests of depositors, policyholders, and creditors.
Comments can be submitted to consultations@osfi-bsif.gc.ca until June 30, 2023. OSFI will assess them and issue final frameworks later this year.
These new frameworks, aligned with international best practices, are aimed at helping us better ensure that Canadian banks and life insurers operating overseas are managing risks appropriately, protecting their depositors, policyholders, and creditors. We look forward to hearing from our stakeholders on this important initiative.
- Peter Routledge, Superintendent of Financial Institutions
Quick facts
- OSFI’s current Total Loss Absorbing Capacity (TLAC) Guideline and Life Insurance Capital Adequacy Test (LICAT) Guideline measure loss-absorbing capacity and capital on a group consolidated basis, not a stand-alone legal entity or solo basis.
- The Basel Committee on Banking Supervision’s Core Principles for Effective Banking Supervision state that supervisors are responsible for supervising banks on both a group and stand-alone basis, including assessing their relationships with other members of the group.
- The International Association of Insurance Supervisors’ Insurance Core Principles state that supervisors are responsible for assessing the ability of capital to absorb losses anywhere in the financial group.