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Bulletin | Covid-19

COVID-19 Economic Response: Measures Impacting Banks And Federally Regulated Trust Companies

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Financial Services Bulletin

Updated April 24, 2020. 

Please note that announcements made since the prior version of this Bulletin are in italics.

The federal government and various agencies and Crown corporations have announced a number of measures in response to the economic disruption and uncertainty resulting from the COVID-19 pandemic. Below are the key announcements made to date that impact banks and federally regulated trust companies.

Department of Finance

The Government of Canada has announced a number of economic relief measures that will impact financial institutions. These measures include:

  • Launching a revised "Insured Mortgage Purchase Program", through which the government will purchase up to $150B of insured mortgage pools through the Canada Mortgage and Housing Corporation.
  • Launching the "Canada Emergency Business Account", which will provide up to $25B to eligible financial institutions so that they can, in turn, grant interest-free loans of up to $40,000 to qualifying small businesses and not-for-profits to help cover operating costs where revenues have been temporarily reduced because of the economic impacts of COVID-19. This program will be implemented by such eligible financial institutions in cooperation with Export Development Canada (EDC). The federal government has announced that the Canada Emergency Business Account will now be available to businesses that paid between $20,000 and $1.5M in total payroll in 2019 (the previous range was between $50,000 and $1M).
  • Launching the "Small and Medium-sized Enterprise Loan and Guarantee", through which EDC will guarantee new operating credit and cash flow term loans, up to $6.25M, that financial institutions extend to small and medium-sized businesses. The cap for this program will be a total of $20B for export sector and domestic companies.
  • Launching a "Co-Lending Program for Small and Medium-sized Enterprises", through which the Business Development Bank of Canada (BDC) and financial institutions can co-lend term loans to small and medium-sized businesses in order to help them meet their operational cash flow requirements. Eligible businesses may obtain incremental credit amounts up to $6.25M, with up to $5M per loan coming from BDC. The potential for lending for this program will be $20B.

Additional details regarding these measures.

On March 30, 2020, OSFI made an announcement regarding how federally regulated deposit taking institutions (DTIs) should treat new capital made available to small and medium-sized enterprises through the government programs noted above. Additional details regarding this announcement.

In addition to the programs noted above, Bill C-13, which received Royal Assent on March 25, 2020, introduces a number of amendments in order to provide the Minister of Finance with increased flexibility and power to take certain actions. These include, for example:

  • Amendments to the Canada Deposit Insurance Corporation Act, which temporarily allow the Minister of Finance to increase the deposit insurance coverage limit from its current level of $100,000.
  • Amendments to the Mortgage and Housing Corporation Act, which authorize the Minister of Finance, with the approval of the Governor in Council, to make payments to the Canada Mortgage and Housing Corporation out of the Consolidated Revenue Fund in order to increase its capital.
  • Amendments to the Financial Administration Act, which temporarily allow the Minister of Finance to, without the authorization of the Governor in Council, borrow money for certain payments and enter into contracts (subject to certain exceptions) that it deems necessary to promote the stability or maintain the efficiency of the financial system in Canada.

Additional information regarding these amendments.

Bill C-14, which received royal assent on April 11, 2020, provides that certain provisions of the Financial Administration Act, as enacted by the COVID-19 Emergency Response Act, cease to have effect on the day after September 30, 2020.

Office of the Superintendent of Financial Institutions

The Office of the Superintendent of Financial Institutions (OSFI) has announced a number of regulatory adjustments to support the resilience of and reduce some of the operational stress on DTIs.

On March 13, 2020, OSFI announced the following initial measures:

  • The reduction of the domestic stability buffer (DSB) by 1.25%, from 2.25% to 1%. This action was taken by OSFI to support domestic systemically important banks' ability to supply credit to the economy. It is expected that the reduced DSB will support in excess of $300B of additional lending capacity for these banks. OSFI expects that banks will use the additional lending capacity to support Canadian businesses and households and indicated that dividend increases and share buybacks should be halted for the time being. OSFI also committed to not increase the DSB for at least 18 months.
  • The suspension of consultation of the minimum qualifying rate for uninsured mortgages and of the coming into force of the new benchmark rate to determine the minimum qualifying rate for insured mortgages. The benchmark rate as currently published by the Bank of Canada will remain in force until further notice.
  • OSFI is reviewing its supervisory and regulatory priorities to align with current conditions.

Additional details regarding these measures.

On March 27, 2020, OSFI announced additional measures, including:

  • Determining that loans subject to payment deferrals, such as mortgage loans, small business loans and retail loans, will continue to be treated as performing loans under the Capital Adequacy Requirements Guideline. This treatment will remain in place for the duration of the payment deferral, up to a maximum of six months. DTIs granting payment deferrals will be subject to additional reporting requirements surrounding these loans, additional details of which will be communicated in the coming weeks.
  • Transitional arrangements for capital treatment of expected loss provisioning, which will result in a portion of allowances that would otherwise be included in Tier 2 capital to instead be included in Common Equity Tier 1 capital. In a letter dated April 9, 2020, OSFI provided further details regarding the calculation of this adjustment and the related reporting on the Basel Capital Adequacy Reporting regulatory return. Additional details can be found here.
  • Temporarily increasing the covered bond limit from the current rate of 5.5% of the issuer's on-balance sheet assets to 10% of the DTI's total assets, including instruments issued to the market and those pledged to the Bank of Canada. This increase will be provided for at least a year.
  • Encouraging DTIs to use operating buffers that are held above the authorized leverage ratio as well as their stock of high quality liquid assets in accordance with the Liquidity Adequacy Requirements Guideline.
  • Adjusting liquidity requirements by providing additional guidance related to the Liquidity Coverage Ratio minimum standard and providing flexibility within the Net Stable Funding Ratio treatment for eligible assets pledged to the Bank of Canada to secure funding.
  • Providing guidance on the application of certain aspects of IFRS 9 in relation to COVID-19. DTIs should also consider additional guidance provided by the International Accounting Standards Board.
  • Delaying the implementation of the remaining measures of the Basel III reform package until at least 2023.
  • Delaying the implementation of the Small and Medium Sized Banks Capital and Liquidity framework until the beginning of 2023, as well as delaying the consultation work on Pillar 2 and Pillar 3 capital and liquidity requirements for small and medium sized banks.
  • Providing a number of additional adjustments to various requirements and timelines, including, among others, offering DTIs flexibility on timelines for regulatory return filings, delaying the implementation of the revised Guideline B-12 for small and medium-sized banks, and eliminating the requirement for banks to submit their Q4 2019 Qualitative Impact Submission.

Additional details regarding these measures.  

On April 9, 2020, OSFI announced further regulatory flexibility measures, including:

  • Allowing DTIs to temporarily exclude: (i) central bank reserves; and (ii) sovereign-issued securities that qualify as High Quality Liquid Assets under the Liquidity Adequacy Requirements Guideline from the leverage ratio exposure measure. This treatment will remain in place until April 30, 2021. Capital freed up through this measure should not be distributed but should be used to support lending and financial intermediation activities.
  • Lowering the capital floor requirement (from 75% to 70%) for DTIs using the Internal Ratings Based Approach to credit risk. This floor factor is expected to stay in place until early 2023.
  • Extending, by one year, the deadline for implementing the final two phases of the initial margin requirements for non-centrally cleared derivatives outlined in its Guideline E-22.
  • Additional adjustments to regulatory reporting requirements, including: (i) delaying the implementation of changes to specific regulatory returns; (ii) granting extensions and not applying late filing penalties to DTIs on a case-by-case basis; and (iii) issuing targeted reporting requests where the information requested is valuable for assessing industry resilience or developing critical policy decisions.

Additional information regarding these measures.

OSFI has also published frequently asked questions, which were updated on April 23, 2020, regarding measures it has taken in response to COVID-19. Through these frequently asked questions, OSFI, among other things, clarified its previous announcement requiring DTIs to halt dividend increases and share buybacks. DTIs can continue to pay regular dividends (but may not increase them), and dividend increases approved before OSFI's initial announcement on March 13, 2020 may proceed. DTIs, however, must immediately halt all purchases or buybacks of common shares, including buybacks previously approved by OSFI. DTIs can continue to purchase or redeem capital instruments other than common shares (subject to approval of the Superintendent and compliance with OSFI's guidelines). OSFI also emphasized that it expects institutions to closely track their credit portfolios and report on a regular basis the developments in these portfolios in response to support programs such as the leverage ratio exclusions and other initiatives launched by the Government of Canada.

Bank of Canada

The Bank of Canada has taken a number of measures in order to provide liquidity support to financial institutions, including:

  • Establishing the Standing Term Liquidity Facility (STLF), which took effect on March 30, 2020. The STLF allows the Bank of Canada to provide loans to an eligible financial institution in need of temporary liquidity support, where the bank of Canada has no concerns about its financial soundness. The Bank of Canada has encouraged banks to use the STLF to help them continue to provide loans to households and businesses during this time.
  • Increasing liquidity support for banks by lengthening the term over which the Bank of Canada lends money to them, widening the collateral the Bank of Canada accepts, and expanding the list of eligible institutions that can access lending from the Bank of Canada.

Additional details regarding these measures (and other measures taken by the Bank of Canada). 

Financial Consumer Agency of Canada

On April 1, 2020, the Financial Consumer Agency of Canada (FCAC) announced that it is maintaining its operations to protect financial consumers, and will be monitoring the commitments that regulated entities are making to accommodate the financial hardships of consumers affected by COVID-19. The FCAC also encouraged all regulated entities to ensure that consumers have access to financial services at a reasonable cost and with the safety and security that they have come to expect. It also expects regulated entities to prioritize access for vulnerable groups who are more likely to be impacted by branch or office closures.

Additional details regarding this announcement.

On April 9, 2020, the FCAC provided a further announcement on how it is responding to the COVID-19 pandemic, including that:

  • It is adjusting regulatory expectations of regulated entities in the current environment, while ensuring that they continue to comply with legislative obligations, voluntary codes of conduct and public commitments.
  • It recognizes that regulated entities will need to reassign and reprioritize their own internal resources in response to COVID-19 and it will work closely with them to minimize the impact of regulatory requirements on their efforts to deliver essential services to Canadians.
  • As the situation evolves, it expects regulated entities to continue to communicate with consumers in a timely manner about any changes that will impact them.

Additional details regarding this announcement.

Canada Deposit Insurance Corporation

The Canada Deposit Insurance Corporation (CDIC) announced a number of measures, which are aimed at allowing its members intuitions to focus their resources on directly supporting the needs of their consumers during this time. The measures announced by CDIC include:

  • Deferring the premium due date until December 15, 2020.
  • Delaying the submission of the stratification section of the Return of Insured Deposits (RID) and allowing member institutions to submit a partially completed RID form by July 15, 2020 (absent a completed deposit stratification) and a completed deposit stratification by December 15, 2020.
  • Offering acceptable delays in complying with the Deposit Insurance Information By-law requirements in light of changes to CDIC deposit insurance coverage effective April 30, 2020. CDIC expects that member institutions will update information in line with the upcoming changes as soon as practical after the changes come into effect.
  • Postponing testing for Data and System Requirements compliance until July 15, 2020.
  • Waiving the annual requirement to notify multi-beneficiary trust depositors about their disclosure requirements.
  • Stepping up public awareness activities to help maintain confidence and trust in the safety and security of depositors' savings.

Additional details regarding these measures.

Financial Transactions and Reports Analysis Centre of Canada 

On March 25, 2020 the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) issued a message to reporting entities acknowledging that the impacts of COVID-19 may affect the ability of some businesses to meet their obligations. FINTRAC has advised that:

  • When it comes to reporting, priority should be given to submitting suspicious transaction reports. Where a reporting entity may be in possession of critical information related to terrorist activity financing but cannot submit the report to FINTRAC in the usual manner, the report or an email should be sent to In other instances where the reporting entity is not able to submit a report to FINTRAC in the usual manner, it can submit a voluntary self-declaration of non-compliance to when it has the opportunity to do so.
  • For now, FINTRAC's interactions with reporting entities will be limited to situations related to reporting issues, circumstances where reporting entities contact FINTRAC for guidance, and the completion of examinations currently underway. FINTRAC will not be contacting reporting entities to initiate new examinations.
  • Given that provincial governments may take measures extending the validity of various government identification documents that have expired after March 1, 2020, if a person presents an identification document affected by such a decision the reporting entity must continue to determine the authenticity of the identification document but can, until further notice, consider the identification document or information as valid and current pursuant to its issuing authority. Alternatively, the reporting entity may wish to consider using another method to verify the identity of the person. 
  • In cases where a reporting entity is unable to meet an obligation, the entity should keep a record indicating why that is the case and, where possible, include any measures being taken to mitigate the risk of non-compliance.

Additional details regarding these announcements.

On April 23, 2020, FINTRAC issued a further message to reporting entities, which provides that:

  • FINTRAC has temporarily relaxed the requirement to authenticate a government-issued photo identification document through the use of technology in instances where the use of the credit file and dual-process methods is not possible. Where an individual is not physically present, reporting entities can apply human judgment to determine whether a document they are viewing appears to be authentic. FINTRAC has also temporarily relaxed the requirement related to consulting a paper record when confirming the existence of a corporation or entity other than a corporation. Where an electronic record from a reliable source accessible to the public is not a viable option, reporting entities can request to receive the paper record via fax, scan or email.
  • The flexibility noted above is temporary, and reporting entities are expected to keep a record of all clients identified using this temporary method and to re-verify the identity of their clients in accordance with the Proceeds of Crime (Money Laundering) and Terrorist Financing Regulations once the physical distancing measures are lifted.

Additional details regarding this announcement.

Looking Ahead

The Government of Canada and various agencies and Crown corporations have shown a willingness to roll out new programs and introduce new measures in response to the evolving COVID-19 impacts. We will continue to monitor these developments as they are announced.

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