{"id":1680,"date":"2008-01-14T17:13:28","date_gmt":"2008-01-14T21:13:28","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=1680"},"modified":"2008-01-14T17:13:28","modified_gmt":"2008-01-14T21:13:28","slug":"osfi-increases-limits-on-bank-preferred-issuance","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=1680","title":{"rendered":"OSFI Increases Limits on Bank Preferred Issuance"},"content":{"rendered":"<p>The Office of the Superintendent of Financial Institutions Canada <a href=\"http:\/\/www.osfi-bsif.gc.ca\/app\/DocRepository\/1\/eng\/guidelines\/capital\/advisories\/adv_pref_sh_e.pdf\">has announced<\/a>:<\/p>\n<blockquote>\n<p>In Principle 1 of the Appendix: Principles Governing Inclusion of Innovative Instruments in Tier 1 Capital, \u201ccommon shareholder\u2019s equity (i.e., common shares, retained earnings, and participating account surplus, as applicable) should be the predominant form of a FRFI\u2019s tier 1 capital. A strongly capitalized FRFI should not have innovative instruments and perpetual non-cumulative preferred shares that, in aggregate, exceed 25% of its net tier 1 capital\u201d.<\/p>\n<p>After taking into account the fundamental characteristics of tier 1 capital and reviewing guidance in other jurisdictions, OSFI has decided to increase this limit to 30%. The maximum amount of innovative tier 1 instruments that can be included in the aggregate limit calculation continues to be 15% of net tier 1.<\/p>\n<p>References to 25% in the April 2003 Advisory Tier 1 Capital Clarifications are amended to 30%. In addition, section 2(b) of the advisory is replaced by the following:<\/p>\n<p>Tier 1 qualifying preferred shares and innovative instruments, at the time of issuance, should not normally exceed 30% of net tier 1 capital. A FRE that wishes to include excess preferred share amounts in tier 1 capital must obtain OSFI\u2019s prior confirmation that this treatment is acceptable. The FRE must provide a supportable plan, acceptable to OSFI, outlining how it proposes to eliminate the excess.<\/p>\n<\/blockquote>\n<p>This increase was briefly noted in the <a href=\"http:\/\/www.prefblog.com\/?p=1679\">CIBC announcement of an equity issue<\/a>.<\/p>\n<p>When we look at <a href=\"http:\/\/www.prefblog.com\/?p=1571\">the year-end summary of issuance capacity<\/a> we see that this really only affects Royal Bank (RY) and, to a limited extent, Commerce (CM) &#8230; the others already had tons of unused capacity, and National Bank (NA) has announced a $400-million Innovative Tier 1 Capital issue, which will have soaked up their room.\n<\/p>\n<p><!--1fb6fc2dfb342919cae870e9e4a3fefe--><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Office of the Superintendent of Financial Institutions Canada has announced: In Principle 1 of the Appendix: Principles Governing Inclusion of Innovative Instruments in Tier 1 Capital, \u201ccommon shareholder\u2019s equity (i.e., common shares, retained earnings, &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25],"tags":[],"class_list":["post-1680","post","type-post","status-publish","format-standard","hentry","category-regulatory-capital"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1680","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1680"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1680\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1680"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1680"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1680"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}