01:48 PM EDT, 05/27/2024 (MT Newswires) -- Canada is implementing Basel IV on an accelerated timeline relative to key competitors, notes Scotiabank. The Office of the Superintendent of Financial Institutions requires Canadian banks to implement these reforms by mid-2026. The U.S. appears to be reconsidering implementation of some of the reforms while the UK and Europe are fully implementing in 2030 and 2032 respectively.

Implementation may require banks to shed up to $270 billion in risk-weighted assets to meet the output floor by mid-2026, Jean-Francois Perrault, Scotiabank SVP & Chief Economist, writes. This would reduce lending to firms and households, including mortgage credit, by about 9% of current nominal GDP at a time of elevated financing needs.

Government-mandated requirements to shed assets (or raise capital) run counter to efforts to raise investment and improve access to the housing market for Canadians, Perrault notes. "This seems to be another instance of policy inconsistency in the Canadian policymaking landscape."

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