OSFI Guidance on Capital Instruments

On December 16, 2010, the Basel Committee on Banking Supervision (BCBS) released new international bank capital adequacy rules and rules for minimum and appropriate forms of bank liquidity (commonly called Basel III). On January 13, 2011, the BCBS released additional Basel III requirements that relate to loss absorbency of capital instruments. The Office of the Superintendent of Financial Institutions of Canada (OSFI) has recently provided some guidance in its advisories (full text available here) on how it plans to implement certain of the Basel III requirements as they apply to banks and federally regulated trust and loan companies (collectively referred to as deposit-taking institutions or DTIs).