Fitch Ratings says the Office of the Superintendent of Financial Institutions’ (OSFI) decision to hit the pause button on implementation of the final Basel III requirements could prompt other jurisdictions, including the U.S., to follow suit. The development made this month’s edition of Fitch’s Bank Regulation Monitor.
“Canada’s decision to freeze the implementation of its Basel III output floor at 67.5%, until other jurisdictions make further progress to implement Basel III, most notably the U.S., could lead to a chain reaction should other authorities similarly decide to freeze their output floor phase-in for level-playing-field considerations,” said Fitch in a written statement.
“The U.K. announced on Jan. 17 that it would postpone the implementation of the Basel III rules by a further year to January 2027, and the EU already has in place a delay for the implementation of the market risk regime,” Fitch said.
U.S. President Donald Trump has also signalled his intention to push back on the Basel reforms.
OSFI announced Feb. 12 that it was placing the reforms on hold, indefinitely. That followed a one-year delay the previous July.
Basel III calls for tighter bank capital requirements, in the form of a standardized capital floor level. Referred to as the output floor, it’s at 67.5% currently. OSFI had announced plans to raise the floor to 70% in 2025 and 72.5% in 2026.
In February, OSFI said “there remains uncertainty about when other jurisdictions will fully implement Basel III.”