Although the federal government recently extended some of the COVID-19 relief programs, including a September 26 CERB extension and a further plan to transition to a revamped EI program, other measures put into place are coming to an end. Specifically, those under the Office of the Superintendent of Financial Institutions (OFSI) umbrella that impact both pensions and loans, are transitioning back to normal.
Pensions. The Office of the Superintendent of Financial Institutions said that it planned to end the temporary freeze on portability transfers for private pension plans due to signs that markets have stabilized.
Loans and deferrals. At the height of the pandemic, OFSI introduced special treatment for loan and insurance premium payment deferrals. They were to be treated as though they were “performing” as opposed to “non-performing”. The latter typically applies anytime a borrower is late on making payments (often by 90-days or more), which then requires the bank to set aside additional capital to protect against losses.
Now the following updates have been introduced to the special capital treatment of loans that were subject to payment deferrals, in order to transition back to standard regulations:
What does this mean for advisors and their clients? The changes could impact the flexibility that banks have when offering deferrals and alternate payment arrangements to those still struggling financially from the effects of the pandemic.
As further financial uncertainties could arise, it’s more important than ever that tax and financial advisors have the tools they need to help Canadians transition and recover from the financial fallout. This includes proactive conversations about debt management against a still uncertain immediate future.
Additional educational resources: On September 30, Knowledge Bureau will be hosting a Virtual CE Summit to discuss these issues under the theme Financial Fallout: Tax, Audits, and Bankruptcies. Enrol now – early-bird tuition offers end on September 15.
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According to OSFI, CAR (Capital Adequacy Requirement) guidelines provide a framework for assessing the capital adequacy of banks, bank holding companies, federally regulated trust and loan companies and cooperative retail associations