OSFI Evades Question on Selective Disclosure

Assiduous Readers will recall that I sent the following query to OSFI regarding selective disclosure:

I note in a Financial Post report(
http://www.nationalpost.com/opinion/columnists/story.html?id=6bb93a4f-b0c0-4d2a-bcd7-be7e6750e212 ) the claim that “Despite the low yields, Nagel says the regulatory authorities have given their approval for rate resets to continue to count as Tier 1 capital. But he said the authorities have not been as kind for continued issues of so-called innovative Tier 1 securities.”

Is this an accurate statement of the facts? Has OSFI given guidance on new issue eligibility for Tier 1 Capital, formally or informally, to certain capital market participants that has not been released via an advisory published on your website? If so, what was the nature of this informal guidance?

I have received the following response:

Thank you for your e-mail of April 10, 2010, concerning tier 1 capital eligibility.

In response to your enquiry, no formal guidance has been issued recently on OSFI’s expectations in this regard; however, OSFI discusses capital with financial institutions on a regular basis, and offers informal guidance as part of our regulatory and supervisory processes.

I have now sent a follow-up:

What informal guidance has been given to issuers regarding the eligibility of various potential structures for inclusion in Tier 1 Capital?

If OSFI does not intend to make this guidance public, how does it justify the selective disclosure made to certain capital market participants and not to others? How does OSFI relate its policy in this matter to its professed desire for market discipline to be an element of financial stability?

What will happen next? A nickel says I get stonewalled.

Leave a Reply

You must be logged in to post a comment.