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Banking regulator to end COVID-related measures on pension plan transfers, loan deferrals

Monday, August 31, 2020 @ 3:18 PM | By Ian Burns

Canada’s federal banking regulator has announced it is phasing out a number of measures it put into place in March to combat the economic effects of the COVID-19 pandemic.

The Office of the Superintendent of Financial Institutions (OSFI) announced Aug. 31 that it is lifting the temporary freeze on portability transfers for private pension plans, as well as gradually phasing out the special capital treatment of loan and insurance premium payment deferrals that was provided to banks and insurers at the start of the pandemic.

“The changes announced today result from our ongoing effort to ensure that our regulatory measures continue to be appropriate for this unprecedented situation while remaining risk-focused and forward-looking,” said Supt. Jeremy Rudin.

OSFI, which supervises more than 400 federally regulated financial institutions and 1,200 pension plans to determine whether they are in sound financial condition, said markets have steadied and the overall solvency of pension plans is sufficiently stable, thus enabling them to remove the restrictions. The decision to discontinue the special regulatory capital treatment of deferrals, which permit loan and insurance premium payment deferrals to be treated as performing, reflects the temporary nature of these measures and will ensure that reporting requirements remain accurate in reflecting credit risk.

The federal government will also extend the business credit availability program (BCAP) to June 2021, as well as extending the application deadline for the Canada emergency business account (CEBA) from Aug. 31 to Oct. 31.

“By making CEBA loans available for an additional two months, we will help more small businesses get into a better position to weather the storm and get back on their feet,” said Deputy Prime Minister and Minister of Finance Chrystia Freeland Aug. 31. “Extending BCAP will improve access to the capital needed by businesses to pay workers’ salaries and cover expenses — and it will also serve as a bridge until we return to more normal borrowing conditions.”

Launched on April 9, CEBA provides interest-free loans of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs — such as rent, utilities and insurance — during a period where their revenues have been temporarily reduced. Further details on these changes will be released in coming days, including a new business account opening process through which qualifying businesses will be able to apply.

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