Canada's bank regulator delays capital floor rules

Canada's banking regulator, OSFI, has delayed a key rule change on "capital floor levels" for banks by one year. This delay allows Canadian banks more time to adjust and align with international standards, particularly as similar rules face opposition in the U.S. How will this postponement impact lending practices? #Banking #Regulation 📊

At today's FAD, we brought significant updates. Alongside the policy rate cut and the cessation of Quantitative Tightening (QT), we introduced a modification to the Banks deposit rate. Starting January 30, the deposit rate will be set at 5 bps below the Bank’s policy interest rate. This adjustment aims to improve the circulation of settlement balances as they decline towards steady state levels over the coming months and support the functioning of short-term funding markets. Recall in our prior research concerning CORRA, we highlighted "further amendments to existing tools or new tools may need to be considered to reinforce the policy rate given the new equilibrium and dynamics of CORRA." For further insights, see CORRA: Explaining the rise in volumes and resulting upward pressure https://lnkd.in/gqencJnN

The credit quality of commercial real estate loans advanced by banks in the euro region is "visibly deteriorating,'' according to an ECB study. 1️⃣ Specialized banks may experience stress 2️⃣ NPLs on credit to property funds is running much higher than for wider market 3️⃣ About 18% of bank lending to property funds is unsecured But overall CRE lending is probably too small to threaten solvency of banking system We wrote it up here: https://lnkd.in/eTrA9Pgc

The Bank of England Base Rate has been reduced to 4.75% 📉 On November 6th, the Monetary Policy Committee (MPC) voted by a majority of 8–1 to reduce the Bank Rate by 0.25 points. #BankRate #InterestRateUpdate #MPC #EconomicPolicy #InflationTarget #FinancialStability #GrowthAndEmployment #MonetaryPolicy #EconomyUpdate #FinanceNews

Bank Of England BoE ..."Progress update: The digital pound and the payments landscape- A summary of work over the past year on a digital pound, including how it relates to the evolving payments landscape." https://lnkd.in/eHxUQZ77

As expected the MPC have voted 7-2 to freeze the Bank of England base rate at 5.25% but the fact that Dave Ramsden (Deputy Governor) voted for a rate cut points that lower interest rates are on the horizon. Learn more here.

Latest in Means & Ways Canada's financial regulator said Friday it will delay imposing stricter capital requirements on commercial banks for a year as part of a planned phase-in of Basel IV reforms. The Office of the Superintendent of Financial Institutions was scheduled to implement the higher capital requirements well ahead of peer countries, however the one-year delay will give the regulator time to consider the implementation timeline in other jurisdictions, according to a statement released on Friday. Scotiabank estimated the new capital rules could have forced banks to shed as much as $260 billion in assets by 2026. One-year won't be enough, and OSFI appears to be buying some time. But it’s nice to see that Canadian regulators occasionally recognize macroeconomic context and competitive landscapes. Here is link to statement: https://lnkd.in/eBN_2PV8 Here is Scotiabank report flagging concerns: https://lnkd.in/esegHYzj

The stricter Basel regulations may have slowed economic growth by reducing bank lending, impacting housing affordability and development. Will banks shift towards higher-risk lending to maintain profitability? Borrowers are definitely facing higher borrowing costs. Regulators may need to balance maintaining financial stability with keeping Canadian banks competitive internationally. #EconomicGrowth #BankRegulations #BaselRules #HousingAffordability #FinancialStability #BankingIndustry #CanadianEconomy #SystemicRisk #ConsumerImpact

French Banks Face Crucial Year After Falling Behind Peers. My article (with beautiful charts...) to read on Bloomberg News : After a couple of years to forget for French banking, the likes of BNP Paribas and Societe Generale are hopeful their shares can narrow the gap to peers in 2025. SocGen and BNP are both down since the beginning of 2022, the year the European Central Bank started hiking after almost a decade of negative interest rates. That share price development lags far behind a gain of close to 50% for the Euro Stoxx Banks Index over the same period. A substantial part of the previous underperformance is linked to barely rising net interest income at France’s largest banks. By comparison, the metric is likely to have risen more than 40% at their largest peers over the past three years. “We are on the other side of the cycle now,” said Deutsche Bank Research analyst Sharath Kumar. “This environment appears ripe for the French banks to outperform European banks in 2025.” “2025 should be a better year for French banks,” said Olivier Sampieri, a senior partner at Boston Consulting Group (BCG). Lenders will benefit from the fixed rates of loans made over the past few years, “while many of their Europeans peers with a higher share of floating-rate loans on their balance sheets will rather lose out now that interest rates are falling,” he said. The expected cut to the Livret A rate would also give a lift to bank earnings. Lowering the rate by 0.5 percentage points could push up pretax profit at SocGen’s French retail unit by 7% and by 5% for the corresponding division at BNP Paribas, Still, it’s likely that France’s political and economic uncertainty will continue to weigh on the country’s banks...

Our latest report on Nordic niche banks out now! We discussed the change in funding metrics in a report earlier this autumn: https://lnkd.in/dnuD4zJs