OSFI is reviewing its 4% limit on covered bond issuance, Superintendent Jeremy Rudin told an ECBC plenary in Vancouver this morning. Boudewijn Dierick, head of covered bond and ABS flow structuring at BNP Paribas, has been named acting deputy chairman of the ECBC until June.

Canadian banks have been lobbying for the relaxation of a cap on covered bond issuance at 4% of a bank’s total assets established by the Office of the Superintendent of Financial Institutions, which is one of the most restrictive limits of any jurisdiction.

In an opening keynote speech at the European Covered Bond Council plenary, Rudin (pictured) highlighted the cap when discussing OSFI’s role in supporting the integrity of the Canadian covered bond framework – which is administered by Canada Mortgage & Housing Corporation (CMHC).

“In order to ensure that the financial stability benefits of covered bonds are not dissipated by excessive issuance, OSFI has applied a cap on issuance of four per cent of a bank’s total assets,” he said. “We are now taking a hard look at this limit and we are doing so in the context of our expectations on the banks’ overall management of asset encumbrance.

“Any revisions that we might make to our approach must encourage banks to maintain enough unencumbered, high-quality assets when times are good to be able to meet both higher collateral requirements, and broader funding needs, if times turn sour.”

The ECBC deputy chairman position has been vacant since Ralf Grossmann recently stood down from the role upon his departure from Société Générale. Under the industry body’s conventions, the deputy chairman steps up to become chairman after a two year term.

Current chairman Niek Allon of NIBC announced the interim appointment of Dierick at an ECBC plenary in Vancouver today (Wednesday), noting that it would provide for continuity until a new deputy chairman is elected in June. Dierick is a non-issuer representative on the ECBC steering committee and has long been involved with its working groups and taskforces.

Allon thanked Grossmann for his dedication and hard work, and invited applications for the position.

Photo: @EMF_ECBC/Twitter