Financial Institutions Experience Slower Activity In Capital Markets

Originally published in National Banking Law Review, vol. 29, no. 4 | August 2010

After unprecedented capital raising in 2008 and 2009,¹ capital market activity for Canadian financial institutions was slow in the first part of this year.² There were a number of reasons for the decreased activity. First, Canadian financial institutions already have capital ratios far in excess of historical norms and the minimum requirements of the Office of the Superintendent of Financial Institutions ("OSFI").³ Second, significant uncertainty exists about what instruments will qualify for capital in the future as a result of the proposed new capital rules released by the Basel Committee of Banking Supervision in December of last year (known as the "Basel III capital rules"). Third, no significant merger and acquisition activity requiring new capital raising occurred in the first part of the year, partly because of the uncertainty regarding the Basel III capital rules.