OTTAWA, ON, July 19, 2023 /CNW/ - The Office of the Superintendent of Financial Institutions (OSFI) is announcing additional clarification related to the liquidity treatment of wholesale funding sources with retail-like characteristics such as high-interest savings account exchange traded funds (HISA ETFs).
There has been rapid growth in both retail and institutional investor interest in HISA ETFs in Canada over the past few years. In some cases, the liquidity practices related to these products has varied between deposit-taking institutions (DTIs).
After reviewing submissions received during its May 2023 consultation, OSFI has decided to defer the previously announced timelines for affected DTIs to align with the Liquidity Adequacy Requirement (LAR) guideline for these products. Instead of expecting them to adhere to current guidance on August 1, 2023, OSFI will confirm any changes to the LAR guidelines in October 2023. DTIs are expected to align with any changes by January 2024.
OSFI reminds deposit-taking institutions that although some innovative funding products, such as HISA ETFs, may have retail characteristics, they remain wholesale funding sources without fixed terms or deposit insurance protection. Accordingly, and in the interim, OSFI expects financial institutions to prudently manage the risk of liquidity runoffs associated with these products.
"Clarification on the treatment of HISA ETFs will help ensure risks are managed appropriately. We will carefully review the feedback we received during our consultation to help us determine the appropriate liquidity treatment for these products in what is a fast-evolving risk landscape."
- Peter Routledge, Superintendent of Financial Institutions
- On May 10, OSFI initiated a public consultation on HISA ETFs and other wholesale products with retail-like characteristics.
- After reviewing over 175 submissions received, OSFI has decided to defer the August 1, 2023 expectation on the liquidity treatment of HISA ETFs.
- In October 2023, OSFI expects to issue further guidance on the issue of the liquidity treatment of wholesale funding sources with retail-like characteristics. Deposit-taking institutions should continue to apply prudent treatment to manage the risk of liquidity runoffs associated with these products.
- Industry should remain prepared for the possibility that, because of its review, OSFI confirms a wholesale liquidity treatment for these products.
SOURCE Office of the Superintendent of Financial Institutions
Contacts: OSFI - Media Relations, Email: [email protected], Telephone: 343-550-9373
Share this article