OSFI undertakes second study of proposed minimum capital test

The Office of the Superintendent of Financial Institutions (OSFI) is undertaking a second quantitative impact study of its new minimum capital test, based on companies’ positions at year-end 2009.
The second QIS is intended to test proposed changes to the Minimum Continuing Capital and Surplus Requirements (MCCSR) concerning market risks.
Similar to the first QIS, conducted in the fall of 2009, the second study will apply shocks to interest rates, equities, and other market variables that affect the valuation of a company’s assets and liabilities. It will measure the change in the company’s financial position under these shocks.
The improvements made to the market risk component include, among others:
•Participating products: more information, justification and calculations are requested.
•Discount rates: base discount rates and scenario rates have been modified to include spreads added to the risk-free rates. The number of scenarios has been reduced, as well as their determination modified.
•The treatment of various types of assets and cash flow has been clarified.