OSFI Reviews Canadian Bank Private Credit Exposure
The OSFI is reviewing how Canadian banks manage risks from private credit exposure. The regulator cited concerns over market opacity and highly leveraged firms.
The federal banking regulator in Canada has launched a review into the exposure of major financial institutions to private credit, citing concerns over the rapid expansion of loans to non-bank groups. The Office of the Superintendent of Financial Institutions (OSFI) announced the move on Tuesday as high-profile corporate failures in the United States have intensified scrutiny on the asset class.
In its annual risk outlook, OSFI noted that the involvement of Canadian banks with private capital firms and their portfolio companies has grown considerably, now representing a material component of their balance sheets. The regulator highlighted that banks are increasingly utilizing non-bank financial institutions (NBFIs) to obtain credit protection through synthetic risk transfers and other specialized arrangements.
