TORONTO- Canada's financial regulator said on Monday it will begin phasing out the treatment of deferred loan and premium payments as performing, introduced earlier this year in response to the coronavirus pandemic.
The changes, introduced in March and April, were part of a raft of measures announced by Canadian authorities to enable banks and insurers to continue to lend and support customers as the pandemic shuttered the economy.
But as the deferral periods for loans and premium payments wind down, the Office of the Superintendent of Financial Institutions (OSFI) is beginning to pull back some of the accommodations.
The decision "reflects the temporary nature of these measures and will ensure that reporting requirements remain accurate in reflecting credit risk," OSFI said in a statement.
Last week, most Canadian banks reported better-than-expected third-quarter profits, as government aid and the deferrals, as well as OSFI's regulatory changes, kept a lid on bad loans, but banks warned of an increase in impairments as these measures end.
Loan and premium payments granted deferrals by banks and insurers before Monday will remain eligible for the special capital treatment for six months, while those approved between Aug. 30 and Sept. 30 will be treated as performing for three months, OSFI said.
Loan deferrals granted after Sept. 30 will not be subject to the special treatment, it said.
OSFI also said it is lifting a temporary freeze on portability transfers for private pension plans, which allow members to transfer the total value of amounts accrued when they leave a plan.
"As the economy stabilizes, risks remain in the financial sector," OSFI said, adding it "remains ready to take any further required action."
(Reporting By Nichola Saminather; Editing by Steve Orlofsky) ((Nichola.Saminather@thomsonreuters.com; +1-416-687-7604;))
