Canada's banking and insurance regulator has made changes to the way that the country's financial institutions are expected to transition to International Financial Reporting Standards in a bid to appease industry concerns.
The new accounting rules are causing significant concern among financial institutions. Banks have been lobbying for more time to prepare for the shift while insurers are studying the impact the rules might eventually have on their variable annuity and segregated funds businesses.
The Office of the Superintendent of Financial Institutions issued a notice Wednesday outlining the requirements for adopting IFRS for fiscal years beginning on or after Jan. 1, 2011.
It said that its changes "should address many of the issues raised" by the sector.
One change will give banks a break on a certain capital measure for an extra three months. OSFI has decided to allow mortgages that the lenders sell to Canada Mortgage and Housing Corp.'s securities programs, such as the Canada Mortgage Bond program, to be excluded from the calculation of the asset to capital multiple if the mortgages were sold by March 31, 2010 rather than the end of 2009.
Another change allows banks and insurers to phase in the impact of the new rules on their key capital ratio (the one that regulators most closely watch) by the quarter ending on or after Dec. 31, 2012.