US Reg Round Up: 27/11/2024

Federal Reserve 

Federal Reserve announces details of periodic review of monetary policy strategy - 22 November 2024 

The Federal Reserve has announced additional details regarding its periodic review of monetary policy strategy, tools, and communications. This review will focus on the Federal Open Market Committee's (FOMC) Statement on Longer-Run Goals and Monetary Policy Strategy, as well as its policy communication tools. The review will not revisit the FOMC's two percent inflation target. Chair Jerome H. Powell emphasized the importance of adapting the Fed’s approach based on lessons from the past five years, with the goal of better serving the American public. Public outreach efforts will include a research conference on May 15-16, 2025, and Fed Listens events across the U.S. The review process will culminate in a report based on the feedback gathered, with discussions starting at the FOMC’s January 2025 meeting. 

Federal Reserve announces payment services pricing for 2025 - 22 November 2024 

The Federal Reserve Board has announced the pricing for payment services offered by Federal Reserve Banks, effective January 1, 2025. These services include check clearing, automated clearing house (ACH) transactions, instant payments, and wholesale payment services. The pricing is designed to recover the costs of providing these services over the long term, with a projected recovery of 104.1% of expenses in 2025. As a result, there will be an average price increase of 2.8% for existing services. Additionally, the Federal Reserve released transaction data for its FedNow instant payments service, showing continued growth in adoption. The full 2025 fee schedule will be published in the Federal Register and on the FRBservices.org website. 

Federal Reserve Board seeks comment on impact of proposed international capital standard - 13 November 2024 

The Federal Reserve Board has invited public comment on a report, required by law, that examines the impact of a proposed international capital standard for large, globally active insurance groups on U.S. consumers and markets. The report, which was developed in collaboration with the U.S. Department of the Treasury, discusses the potential effects of the standard on the U.S. financial system. 

The Office of the Superintendent of Financial Institutions

OSFI's Fall Quarterly release: new risk guidelines, mortgage standards adjustments, and eased regulations - 21 November 2024 

The Office of the Superintendent of Financial Institutions (OSFI) unveiled its fall Quarterly Release, announcing several key measures designed to streamline and enhance its regulatory framework. Among the updates, OSFI confirmed that the Minimum Qualifying Rate (MQR) for uninsured straight switches at renewal is no longer required. Other notable releases include revised guidelines on Commercial Real Estate (CRE) lending, which clarify forbearance expectations, and a new regulatory notice on culture risk management, focusing on governance and enterprise-wide culture. Additionally, OSFI introduced updated guidelines for Liquidity Adequacy Requirements (LAR) and Life Insurance Capital Adequacy Test (LICAT), as well as new rules for mortgage insurer capital adequacy. The IFRS 17 guideline has been finalized to clarify accounting expectations. As part of an ongoing policy review, OSFI will rescind 20 outdated guidelines, aligning its framework with emerging risks. 

Backgrounder: Minimum Qualifying Rate (MQR) - 21 November 2024 

As of November 21, 2024, the Office of the Superintendent of Financial Institutions (OSFI) has removed the requirement for a set Minimum Qualifying Rate (MQR) for uninsured straight switches at renewal. A straight switch refers to when a borrower switches their uninsured mortgage to a new lender without increasing the loan amount or amortization period. OSFI continues to expect lenders to follow sound residential mortgage underwriting principles outlined in Guideline B-20 and to make decisions based on their risk appetite and underwriting policies. This change is part of broader efforts to reduce mortgage lending risks, coinciding with the introduction of new loan-to-income limits, which will help contain overall residential mortgage credit risk. The updated MQR guidelines are effective immediately. 

Backgrounder: Culture Risk Management – regulatory notice - 21 November 2024 

OSFI has issued a Regulatory Notice on Culture Risk Management, setting expectations for managing culture risk, including governance, fostering a desired culture, and enterprise-wide management. It applies to all financial institutions and foreign branches, incorporating feedback from a three-year consultation. Culture plays a key role in decision-making and risk management, impacting the safety and integrity of institutions. The Notice provides clearer guidance for effective oversight and aligns with other OSFI guidelines, such as the Corporate Governance and Integrity and Security Guidelines. The Notice is effective immediately. 

Backgrounder: revised regulatory notice on Commercial Real Estate Lending -  21 November 2024 

OSFI has updated its Regulatory Notice on Commercial Real Estate (CRE) Lending to clarify expectations on forbearance practices, emphasizing the need for sound internal policies, limits, and risk monitoring. Forbearance refers to temporary concessions granted to borrowers facing financial difficulty. The revised notice aims to address the cyclical nature of CRE, particularly in the construction, development, and office sectors, which face significant stress. OSFI stresses that forbearance should not delay appropriate credit risk mitigation and institutions must carefully assess its use to ensure proper provisioning, capital treatment, and alignment with their risk appetite. The updated notice is effective immediately. 

Backgrounder: Mortgage Insurer Capital Adequacy Test (MICAT) - guideline (2025) - 21 November 2024 

The Mortgage Insurer Capital Adequacy Test (MICAT) guideline, effective January 1, 2025, outlines the minimum capital mortgage insurers must hold to remain financially secure. It strengthens the financial stability of the mortgage insurance sector by ensuring insurers maintain capital buffers to manage unexpected losses. The updated guideline introduces a standardized approach for mortgages on multi-unit residential properties, using risk weight factors from the Capital Adequacy Requirements (CAR) for real estate exposures. This change aligns with the International Basel III reforms and aims to reduce the risk of insurer insolvency, promoting stability in the housing market. 

Backgrounder: International Financial Reporting Standard (IFRS) 17 - guideline replacing temporary advisory - 21 November 2024 

The IFRS 17 Guideline, effective immediately, replaces the temporary advisory and standardizes how insurers report insurance contracts. It enhances transparency by recognizing profits gradually, improving comparability across the insurance industry. This guideline consolidates OSFI’s accounting expectations for specific insurance products and addresses stakeholder concerns about comparability. By streamlining these expectations, it promotes more consistent financial statements, allowing stakeholders—policyholders, investors, and regulators—to better understand an insurer's financial position and performance. The IFRS 17 Guideline is linked to OSFI's capital guidelines and the Memorandum to the Appointed Actuary (2024). 

Backgrounder: Liquidity Adequacy Requirements - guideline (2025) - 21 November 2024 

The final 2025 Liquidity Adequacy Requirements (LAR) Guideline, effective April 1, 2025, ensures that federally regulated banks, bank holding companies, and trust and loan companies can meet deposit withdrawals and payment obligations, even in times of financial stress. Key updates include enhanced monitoring tools for intraday liquidity risk, a new regulatory return for direct clearers of Canada's Large Value Payment System (Lynx), and updates to the treatment of Bankers' Acceptances (BA) in light of the discontinuation of the Canadian Dollar Offered Rate (CDOR) benchmark. These updates strengthen the resilience of Canada's financial system by aligning with international standards and addressing lessons from recent global liquidity events. The guideline also introduces changes for Small and Medium-Sized Deposit-Taking Institutions (SMSBs) when revisions are made to the LAR or Capital Adequacy Requirements (CAR) Guidelines.