Stephen Kerr, a partner in the financial institutions group at law firm Fasken Martineau DuMoulin LLP in Toronto, said the impact of the oil price downturn is an additional “headwind” the banks must deal with as they face new compliance and regulatory capital requirements.
“The more immediate market impact will be on profits and share prices rather than on significant changes to capital as the Big Six banks are extremely well capitalized,” he said.
Kerr said the focus at OSFI is likely on the potential for “contagion” beyond direct energy-related losses.
“The question the regulator will be assessing is the meaning of ‘energy related exposure’” Kerr said.