12:43 PM EDT, 06/19/2024 (MT Newswires) -- While Tuesday's Domestic Stability Buffer (DSB) update maintained the status quo, the Basel III Output Floor is a different (growing) capital burden is facing the banking sector, writes National Bank.

The sector's Risk Weighted Asset (RWA) balance would increase by around $80 billion, if the Output Floor were fully implemented, National Bank's Gabriel Dechaine estimates. "Such an increase not only impacts banks directly (e.g., ROE drag), it also represents a risk to the Canadian economy from reduced credit supply and to consumers through reduced choice for lending products, he adds.

Given relaxation of capital regulation in other jurisdictions (or potential thereof), Dechaine believes Canadian bank investors would welcome similar developments in Canada.

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