Scotiabank Response to OSFI Capital Advisory Regarding Treatment of Non-Qualifying Capital Instruments

TORONTO, Feb. 7 /CNW/ - In response to the February 4, 2011 Office of the Superintendent of Financial Institutions Canada (OSFI) advisory, Treatment of non-qualifying capital instruments, Scotiabank today announced that it expects to manage its capital within the applicable Basel III requirements without invoking the use of any regulatory event redemption call features contained within applicable capital instruments. These features were only included in the Bank's innovative Tier 1 capital instruments that were issued in the Canadian market. Accordingly, the Bank will not be disclosing a regulatory event redemption schedule. 

On December 16, 2010, the Basel Committee on Banking Supervision (BCBS) published the final text of the Basel III rules. In addition, on January 13, 2011 additional guidance was issued specifically with respect to requirements for loss absorbency of capital at the point of non-viability. These rules affect the eligibility of instruments for inclusion in regulatory capital and provide for a transition and phase-out of instruments that do not meet the Basel III requirements. OSFI has indicated it intends to adopt these rules. 

Beginning January 1, 2013, capital instruments that no longer qualify as non-common Tier 1 or Tier 2 instruments under Basel III will be phased out. The phase-out will impact the extent to which these instruments will qualify for recognition as regulatory capital.  Recognition will be initially capped at 90 percent for non-qualifying Tier 1 and Tier 2 instruments separately, on notional amounts outstanding at January 1, 2013, with the cap reducing at a rate of 10 percent annually.  

While the Bank has no present intention of invoking any regulatory event redemption features in its outstanding capital instruments, the Bank reserves the right to redeem, call or repurchase any capital instruments within the terms of each offering, in accordance with OSFI's advisory.

Scotiabank is one of North America' s premier financial institutions and Canada' s most international bank. With more than 70,000 employees, Scotiabank Group and its affiliates serve some 18.6 million customers in more than 50 countries around the world. Scotiabank offers a broad range of products and services including personal, commercial, corporate and investment banking. With assets above $526 billion (as at October 31, 2010), Scotiabank trades on the Toronto ( BNS ) and New York Exchanges ( BNS ). For more information please visit www.scotiabank.com.

Forward-Looking Statements:

Our public communications often include oral or written forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the "safe harbour" provisions of the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may include comments with respect to the Bank's objectives, strategies to achieve those objectives, expected financial results (including those in the area of risk management), and the outlook for the Bank's businesses and for the Canadian, United States and global economies. Such statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "intent," "estimate," "plan," "may increase," "may fluctuate," and similar expressions of future or conditional verbs, such as "will," "should," "would" and "could."

By their very nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that predictions and other forward-looking statements will not prove to be accurate. Do not unduly rely on forward-looking statements, as a number of important factors, many of which are beyond our control, could cause actual results to differ materially from the estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to: the economic and financial conditions in Canada and globally; fluctuations in interest rates and currency values; liquidity; significant market volatility and interruptions; the failure of third parties to comply with their obligations to us and our affiliates; the effect of changes in monetary policy; legislative and regulatory developments in Canada and elsewhere, including changes in tax laws; the effect of changes to our credit ratings; amendments to, and interpretations of, risk-based capital guidelines and reporting instructions and liquidity regulatory guidance; operational and reputational risks; the risk that the Bank's risk management models may not take into account all relevant factors; the accuracy and completeness of information the Bank receives on customers and counterparties; the timely development and introduction of new products and services in receptive markets; the Bank's ability to expand existing distribution channels and to develop and realize revenues from new distribution channels; the Bank's ability to complete and integrate acquisitions and its other growth strategies; changes in accounting policies and methods the Bank uses to report its financial condition and the results of its operations, including uncertainties associated with critical accounting assumptions and estimates; the effect of applying future accounting changes; global capital markets activity; the Bank's ability to attract and retain key executives; reliance on third parties to provide components of the Bank's business infrastructure; unexpected changes in consumer spending and saving habits; technological developments; fraud by internal or external parties, including the use of new technologies in unprecedented ways to defraud the Bank or its customers; consolidation in the Canadian financial services sector; competition, both from new entrants and established competitors; judicial and regulatory proceedings; acts of God, such as earthquakes and hurricanes; the possible impact of international conflicts and other developments, including terrorist acts and war on terrorism; the effects of disease or illness on local, national or international economies; disruptions to public infrastructure, including transportation, communication, power and water; and the Bank's anticipation of and success in managing the risks implied by the foregoing. A substantial amount of the Bank's business involves making loans or otherwise committing resources to specific companies, industries or countries. Unforeseen events affecting such borrowers, industries or countries could have a material adverse effect on the Bank's financial results, businesses, financial condition or liquidity. These and other factors may cause the Bank's actual performance to differ materially from that contemplated by forward-looking statements. For more information, see the discussion starting on page 62 of the Bank's 2010 Annual Report.

The preceding list of important factors is not exhaustive. When relying on forward-looking statements to make decisions with respect to the Bank and its securities, investors and others should carefully consider the preceding factors, other uncertainties and potential events. The Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by or on its behalf.

Additional information relating to the Bank, including the Bank's Annual Information Form, can be located on the SEDAR website at www.sedar.com and on the EDGAR section of the SEC's website at www.sec.gov.

SOURCE Scotiabank

For further information:

Media Contact: Ann DeRabbie, Scotiabank Media Communications, 416-933-1344


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