OSFI to withdraw pandemic leverage policy

Federal banking regulators are preparing to unwind another temporary measure that was adopted to ease pressure on the financial sector in the immediate aftermath of the onset of the Covid-19 pandemic.

The Office of the Superintendent of Financial Institutions (OSFI) said Tuesday that it’s planning to eliminate a temporary revision to banks’ leverage ratio rules that was introduced in April 2020. The revision allowed banks to exclude certain “high quality liquid assets” from their leverage ratio calculations.

At the time, OSFI said the temporary exclusions from the leverage ratio requirements would enable banks to support lending amid the financial stress inflicted by the pandemic.

The regulator modified the temporary accommodation, effective Jan. 1, 2022, and now it’s planning to fully withdraw it in April 2023.

“Through its ongoing monitoring efforts, OSFI has determined that the leverage ratio exclusion of central bank reserves is no longer necessary or fit-for-purpose,” the regulator said in a letter to the industry.

“OSFI remains prepared to adjust its guidance and measures if necessary.”

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