Regulatory Alerts2020-04-09
Notice on Transitional Capital Treatment for Expected Loss Provisioning
The Autorité des marchés financiers (AMF) has issued a notice establishing transitional capital adjustments for expected credit loss provisioning applicable to Quebec’s trust, savings, deposit, and credit union institutions. Financial institutions must calculate the adjustment by applying tax rates and phased scaling factors (70 percent in 2020, 50 percent in 2021, and 25 percent in 2022) to the increase in Stage 1 and 2 allowances, adding the resulting amount to Tier 1A capital while allocating remaining eligible allowances to Tier 2 capital. Institutions are required to report these adjustments on the Basel Capital Adequacy Reporting form and publicly disclose their impact on Tier 1A, total capital, TLAC, and leverage ratios in accordance with Pillar 3 guidelines.