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Canada Banking Regulator Releases Basel III Capital Rules

Canada’s banking regulator released final Basel III capital adequacy rules that aim to bring the country’s lenders into line with new global standards beginning next year.

The rules would require Canadian banks to hold a minimum buffer of 7 percent common equity by the first quarter of next year, the Ottawa-based Office of the Superintendent of Financial Institutions said in a release today. Provisions related to add-on charges for counterparty risk on over-the-counter derivatives will be implemented by the first quarter of 2014 in order not to disadvantage Canadian banks.

Some nations are struggling to meet a Jan. 1, 2013, deadline for starting to apply the revised Basel rules, which were drawn up by global regulators to prevent a repeat of the financial crisis that followed the collapse of Lehman Brothers Holdings Inc. Countries have six years to phase in the changes.

“The issuing of this guideline is a significant milestone in meeting international commitments,” Mark Zelmer, Osfi’s assistant superintendent, said in the statement. “Canadian banks are well positioned to meet the 2019 Basel common equity capital requirements at the beginning of 2013.”

In addition to the common equity targets, the bank watchdog said it expects all banks to hold a minimum 8.5 percent “all-in” total Tier 1 capital and 10.5 percent total capital by 2014.

Canadian Imperial Bank of Commerce, Canada’s fifth-largest bank, said last week in a quarterly earnings report its estimated common equity Tier 1 ratio is 9 percent. Toronto-Dominion Bank, the nation’s second-largest lender, said its estimated Tier 1 common equity ratio is 8.2 percent.

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