This article was last updated on April 16, 2022
Canada: 
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A recent update has confirmed that Canada’s six largest banks have been labeled to be too big for being allowed to fail the country by the federal regulator, which implies that they will be subject to more strict capital requirements and supervision. The update published by The Office of the Superintendent of Financial Institutions, mentioned that the designation stems from a framework issued by the Basel committee on banking oversight in October that set out guidelines for assessing domestic financial institutions.
The requirements of OSFI implies that, the Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada and Toronto-Dominion Bank will all be subjected to an additional one per cent capital buffer for risk, indicating that they will have to hold more assets in reserve to protect against a sudden run on deposits. The head of OSFI, Julie Dickson, mentioned that “the measures … are designed to limit the likelihood that a major bank would encounter distress or failure that could negatively impact the Canadian economy or taxpayers.”
On the other hand, an analyst of Barclays Capital, John Aiken, anticipated that an announcement is expected by markets, which will be unlikely to affect the bank’s valuations. In a note to clients, Aiken, stated that “given the capital positions of the banks under the Basel III guidelines and the fact that the transition will have three years to be implemented, we do not believe that this will be an onerous burden for the Canadian banks.” He added that “further, given that the 100 basis point surcharge is broadly in line with the expectations of the market, we do not believe that today’s announcement should have a material impact on the banks’ valuations.”
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