Covered Bond Program Overview
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Domestic Stability Buffer
Background
Canadian Domestic Systemically Important Banks (D-SIBS) are required to hold Pillar 2 capital buffer that is privately
communicated to each bank, to address risks that are inadequately captured by the Pillar 1 minimum capital requirements
D-SIBS are subject to publicly-disclosed Pillar 1 minimum of 8.0% and undisclosed non-public Pillar 2 buffer
What Has Changed
The Domestic Stability Buffer increased to 2.50% of RWA effective October 31, 2021 from 1.00%; it can range between 0% to
2.5% depending on OSFI's assessment of systemic vulnerabilities D-SIBS face including Canadian consumer and institutional
indebtedness, as well as asset imbalances in the Canadian market
OSFI announced on June 20, 2018 a revised framework where a component of the Pillar 2 buffer for D-SIBS will be publicly
disclosed (1)
The purpose of public disclosure is to provide greater transparency to the market and other stakeholders, and to enhance the
usability of the buffer by the banks in times of stress
A breach would require a remediation plan from the bank
OSFI will undertake a review of the buffer on a semi-annual basis, in June and December
any changes being made public
Implications for Banks
There is no incremental capital requirement for banks. This is a transition of the Pillar 2
capital buffer requirement from private to public domain.
Given CIBC (and other Canadian D-SIBS) are well above the minimum requirement,
do not believe this will impact banks' capital planning in a material way
Current
Domestic
Stability
Buffer(2)
11.7%
2.50%
Pillar 1
Minimum
for D-SIBS*
8.0%
OSFI Target
CIBC
(Q2/22)
CIBC◇
1. There may be an additional private component to Pillar 2 buffer specific to individual banks
2. The Domestic Stability Buffer was originally set at 1.5% when introduced
Consists of 4.5% minimum plus 2.5% of capital
conservation buffer plus 1.0% current D-SIB surcharge
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