Following the financial crisis of 2008, harsher regulations
governing financial institutions were implemented to mitigate
future economic recessions. As discussed in an article by the Canadian Bankers Association,
new financial regulations, such as Basel III, have targeted capital
and liquidity because both affect a bank's ability to
"cushion the blow" of any losses and maintain its ability
to meet its financial responsibilities. The international
regulation, Basel III, is comprised of capital and liquidity rules,
which were implemented in Canada in 2013 and 2015 respectively.
Basel III Capital Rules:
The Basel III capital rules were introduced in Canada by
national regulators as the Capital Adequacy Requirements (CAR)
Guideline. This Guideline requires banks to have an amount of
capital that is at least 10.5% of their "risk-weighted
assets" before 2019. Also, since January 1, 2016, greater
requirements have been placed on the six largest Canadian banks in
Canada.
