Tougher rules for global banks will benefit Canada’s banks, in the face of rising market risks, says Moody’s Analytics.
In a January commentary, Moody’s notes that the Office of the Superintendent of Financial Institutions (OSFI) has indicated that it will adopt the Basel III regime’s new leverage rules, which were finalized earlier this week. “The new rules may be more restrictive for some banks, even after they were loosened this week,” it says.
Nevertheless, Moody’s says that the Canadian banks will have no trouble meeting OSFI’s 2015 deadline. In the commentary, it says that the banks should “find it relatively easy” to live with the new tougher rules to be imposed under the Basel III regime.
And, the more stringent regulation should ultimately help insulate the banks from growing risks, it suggests. “The rules will strengthen the financial system against rising risk from household debt and house prices,” it says.
“Adopting regular stress-testing, which OSFI has endorsed but not imposed, could also clarify banks’ exposures,” it adds.