On October 20th, OSFI adopted its proposed changes to the Capital Adequacy Return (CAR) and the Mortgage Insurer Capital Adequacy Test (MICAT). OSFI’s cover letter on changes to the CAR provides a summary of anonymized sector feedback. At the same time, OSFI also made additional changes to the Life Insurance Capital Adequacy Test (LICAT) and Minimum Capital Test (MCT), as well as to the CAR and MICAT to clarify the capital treatment for FRFIs.
OSFI consulted on the initial changes to the CAR and MICAT through its October 11th. The consultation proposed incremental changes to add resiliency to Canada’s mortgage finance system amid negative amortization resulting from the combined effect of high household indebtedness, the rapid increases in interest rates, and the increased cost of living. A copy of CCUA’s response is available here.
The revised capital guidelines are effective fiscal Q1 2024, which is January 1, 2024 for most institutions. For banks with a fiscal year end of October 31, the revised CAR guideline is effective November 1, 2023.