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Proposed updates to FSRA’s Liquidity Adequacy Requirements Framework and the Capital Adequacy Requirements Framework
Technical Advisory Committee for Credit Union Policy Initiatives
December 8, 2025
External meeting attendees:
Brent Furtney
Drake Reid
Janet Johnson
Jason Daly
Lara Stilin
Michael Mercer
Michale Beland
Matthew Hitchens
Sandy Stephens
Sunny Sodhi
Michael Mercer
FSRA meeting attendees:
Ayesha Zubair
Bradley Hodgins
Dan Oprescu
Daniel Padro
James Aderinwale
Roobina Medhizadah
Jeffrey Ledger
Jeff Sweeting
John Caldwell
Ken Chan
Oma Coke
Sandor Szalai
Shamaila Mian
Sola Olabiyi
Ministry of Finance Attendees
Armaan Sahgal
Ethen Mata
Meeting purpose and introduction
FSRA thanked the Technical Advisory Committee for Credit Union Policy Initiatives (TAC) members for their attendance at the inaugural meeting of the new term. FSRA set out the purpose of the meeting:
- To seek the TAC’s input on FSRA’s preliminary proposals to update the Liquidity Adequacy Requirements for Credit Unions and Caisses Populaires Rule (LAR Rule) and the Capital Adequacy Requirements for Credit Unions and Caisses Populaires Rule (CAR Rule).
FSRA reminded the TAC about the public consultation on the Eligible Financial Contracts Rule (EFC), which closes on December 19, 2025. FSRA reiterated that it took the approach of aligning the definitional EFC Rule as closely as possible with the federal EFC regulations. FSRA encouraged the TAC to review the Rule and provide any feedback prior to the closing of the public consultation period.
1. Liquidity Adequacy Requirements Rule for Credit Unions and Caisses Populaires
FSRA noted that they considered three overarching themes to guide the preliminary proposals for the Liquidity Framework Review. FSRA provided an overview of the preliminary proposals related to the three themes of Securitization, Liquidity Risk Management and Regulatory Efficiency, and their intended outcomes (i.e. provide CUs with greater flexibility to diversify their funding base, strengthen the sector’s resilience to unanticipated shocks, and streamline the Liquidity Framework to enhance its efficiency and effectiveness).
Discussion questions
A TAC member noted that they were supportive of the three themes outlined and sought clarity on whether FSRA will apply a risk-based approach to securitization.
FSRA stated that they wanted to move away from hard limits and move to a more principles-based approach to securitization to ensure that credit unions are not being impeded from using securitization as a viable and important source of funding. FSRA welcomed feedback and information from the sector as FSRA refines its proposal on securitization.
A TAC member inquired whether FSRA is considering technical amendments to quantitative aspects such as high-quality liquid assets or liquidity coverage ratio. FSRA noted that, as part of the review process, we looked at the alignment of the framework with best practices (OSFI, Basel) and it was determined that the LAR Rule is generally consistent with these frameworks. FSRA welcomed feedback from the sector on any deficiencies that they felt may require technical amendments to the framework.
A TAC member noted that they were supportive of the review given it will streamline and make the framework more consistent, but they wanted clarity on the outcome of the review. FSRA confirmed that the desired outcome is an updated LAR Rule and two pieces of supporting streamlined guidance.
Next steps
FSRA noted that they will engage with the TAC again when they have a consultation draft of the proposed updates to the LAR Framework.
2. Capital Adequacy Requirements Rules for Credit Unions and Caisses Populaires
FSRA reminded the TAC of the engagement on CAR Rule review in April 2025 and acknowledged that their feedback and suggestions were taken into consideration when developing the proposals.
Credit risk – Personal loans
FSRA provided an overview of the proposal for credit risk and noted that all proposed risk weights were based on feedback gathered from the sector, review of academic literature and best practices across jurisdictions. FSRA also emphasized that these proposals are based on early data from the Quantitative Impact Study.
A TAC member asked questions related to the factors considered in determining risk weights. FSRA explained that the calculation was based on practices in other jurisdictions, as well as the data they had available. FSRA added that they are open to receiving more input on this matter.
Credit risk – Residential mortgages
FSRA presented its proposal for credit risk - residential mortgages and emphasized that the goal of the proposal was to better allocate capital according to the level of risk in underlying assets.
A TAC member inquired about how factors, such as changes the risk weight, were considered in developing the proposal. FSRA clarified the general methodology used to develop the proposals and confirmed they remain open to further feedback and suggestions as the work progresses. The TAC member also asked for clarity as to whether credit score refers to cycle score or another definition. FSRA noted that they will consider clarifying this point.
Another TAC member raised concerns about consistency in how credit unions apply certain risk metrics. FSRA explained that while the framework aims to move towards principle-based regulation, there are areas where prescriptive rules are necessary to ensure consistency across credit unions and will be providing clear definitions to guide credit unions in the calculations.
TAC members inquired about the rationale for underlying proposals, for example, with LTV and TDSR. FSRA explained that the proposed threshold reflects the lending portfolios and risk characteristics of Ontario credit unions, and that it remains appropriate for Ontario given the province’s macroeconomic outlook. FSRA also highlighted that other regulators are consulting on similar topics.
Credit risk – Home Equity Line of Credit (HELOC)
FSRA provided an overview of the proposals for HELOC, noting it was previously grouped with mortgages but is now separated. A TAC member noted that HELOC values can fluctuate and inquired how these fluctuations are being calculated. FSRA noted they will take this question back for further consideration.
Another TAC member asked whether data is available on income-producing loans. FSRA clarified that these categories fall under the new Regulatory and Risk Data Standard (RRDS) framework within the EDC and explained that commercial categories have been identified under the RRDS, and credit unions are filling in the required attributes. FSRA noted that early indications show that credit unions are categorizing information correctly. The TAC member also inquired about potential cost impacts for credit unions. FSRA responded that overall costs are still trending lower.
Credit risk – Commercial lending
FSRA presented its proposals for commercial lending. One TAC member inquired about how certain sectors, such as agriculture and small and medium enterprises, are reflected in the proposals. FSRA explained the general considerations that informed the proposals including sector-wide data and developments in other jurisdictions, and noted they remain open to continued dialogue on these areas. FSRA invited further feedback from the TAC and credit unions.
Credit risk – Commercial lending (real estate)
FSRA presented its proposals on credit risk – commercial lending for real estate.
A TAC member inquired about the EDC project, specifically phase 2, and when commercial characteristics and related data points would be available. FSRA responded that all calculations rely on phase 1 data, which is complete. FSRA noted that phase 2 is progressing well and emphasized that, from a data perspective, the sector is prepared. FSRA added that the focus now is on credit unions improving data quality. The TAC member also asked for perspective on moving to higher thresholds and whether there is potential for harmonization across the sector. FSRA noted that different project types may warrant distinct treatment and confirmed the topic is open for further discussion as the proposals continue to develop.
A TAC member commented that the proposed numbers appear aggressive and referenced OSFI’s recent proposals, asking about pre-sale requirements. FSRA welcomes suggestions and comments from the committee on this. FSRA reiterated their commitment to the sector not to request additional information beyond what is already being requested.
Operational risk
FSRA presented an overview of its proposals on operational risk. TAC members asked about how scale and participation in different business lines are incorporated in the proposed scoring approach. FSRA noted the approach reflects FSRA’s supervisory experience and sector-specific data and helps ensure that capital requirements better reflect the size, complexity and risk profiles of Ontario credit unions.
A TAC member highlighted the difficulty of quantifying operational risk and asked questions about how factors such as institutional size, business activities, and organization structure/ legal structure are reflected in the developing proposals.. FSRA explained that the methodology aims to reflect both size and complexity, noting that operational risk materializing in a smaller credit union does not have the same impact as in a larger one and that this approach aims to balance these two dimensions. FSRA added they remain open to ideas on potential indicators that could further strengthen the framework and acknowledged questions related to organizational structure and complexity will continue to be explored as work progresses.
Interest Rate Risk (IRR)
FSRA provided an overview of its proposals on IRR, emphasizing the importance of aligning the framework with the current interest rate environment. A TAC member asked whether risk weighted assets will be calculated as a combination of credit risk, IRR, and operational risk, and whether any relief provided offset any additional capital charges connected to interest rate risk. FSRA noted that some rebalancing may be expected.
Quantitative Impact Study (QIS)
FSRA noted that the QIS work is leveraging the data received for the tariff-related assessment work and data available from the EDC portal. The objective of the data is to better address the risk profile of individual credit unions. A TAC member asked whether FSRA will be sharing the results of the QIS and if FSRA would provide analysis or enable support, or if credit unions are expected to conduct their own quantitative analysis. FSRA responded that all data originates from EDC, and FSRA will be working with individual credit unions to identify shortcomings and areas for improvement in data completeness and quality. FSRA also noted it is open to working directly with any credit union that wishes to engage further to complete their own analysis and advised credit unions to work with their relationship manager for more information.
Strengthening the composition of capital and capital management
FSRA presented its proposals for the composition of capital. A TAC member asked whether a grandparent clause would be included in the transition for leverage ratio. FSRA noted that currently, no grandparent clause is planned.
Next steps
FSRA provided an overview of next steps. A TAC member thanked FSRA for considering transition times in the proposal. Another TAC member asked about the ideal target date for implementation. FSRA explained that over the next several months, data will be reviewed from EDC to ensure the methodology reflects the intended goal of identifying areas of risk.
One TAC member inquired whether full operationalization would occur in 2026. FSRA responded that timelines depend on the sector, the Board of Directors and the Minister of Finance’s approval. FSRA reiterated that the purpose of the TAC is to maintain ongoing discussions and keep members as informed, and they plan to engage again in spring 2026.
Closing remarks
FSRA concluded the meeting by expressing their appreciation for the level of interest and engagement form the TAC and that progression of their proposals depends on both stakeholder engagement and data quality.