The Canadian regulator has postponed landmark post-financial crisis banking reforms following repeated threats from the US president over tariffs.
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The Office of the Superintendent of Financial Institutions (OSFI) delayed full implementation of the international Basel III banking and capital reforms until further notice on Wednesday, following repeated clashes with President Donald Trump.
The regulator’s chief Peter Routledge cited remaining uncertainty about when other jurisdictions “will fully implement Basel III” in a statement released Wednesday. OSFI said it has nearly fulfilled its commitments under the framework but will halt further progress.
“OSFI remains committed to Basel III principles because we believe our commitment will enhance the resilience of the Canadian banking system,” Routledge said. The Basel Committee on Banking Supervision (BCBS) oversight board unanimously reaffirmed its support for the capital framework on 4 February.
The framework “will strengthen banks’ ability to withstand financial shocks and support economic growth while enabling them to compete and take reasonable risks,” the superintendent added. “Key to these reforms’ success is full, timely, and consistent adoption and implementation across BCBS jurisdictions so that competitive balance prevails throughout the international banking system.”
“Since the global financial crisis, OSFI has worked to build resilience in Canada’s financial system, which enables financial institutions to adjust to uncertainty and cushion themselves against economic shocks,” Routledge said.
The Basel reforms were agreed by leading economies in the wake of the financial crisis and set minimum capital requirements for banking institutions to avoid the contagion which plagued global markets from 2008 to 2009.
While the US had already delayed implementation, Trump’s election victory has stalled progress on Basel III further, as his administration pursues deregulation in the financial sector and has cast doubt over the framework’s durability.
The Bank of England announced in January it would be delaying Basel III implementation until at least 2027 while it analyses Trump’s next moves.
Trump has repeatedly threatened to impose tariffs on Canada in recent weeks, accusing the US’s northern neighbour of allowing fentanyl – which is fuelling America’s devastating opioid crisis – to cross the border. However, a planned 25% tariff on Canadian imports has been stalled until March.
The US is Canada’s largest trading partner. Tariff threats have raised tensions between the longstanding allies, which have also suffered from Trump’s repeated references to Canada as the “51st state” of the US.