OTTAWA, March 26 (Reuters) - Canada's banking watchdog said on Tuesday it sees the country's six largest banks as being of systemic importance to the domestic economy and that it will make them keep 1 percent more capital on hand starting January 2016 to protect them from financial disruption.
The Office of the Superintendent of Financial Institutions (OSFI) said the six banks are so big and complex that their failure would damage the Canadian economy. The banks are: Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada , Royal Bank of Canada and Toronto-Dominion Bank .
The OSFI statement expanded on an announcement in the March 21 federal budget that said some banks would face higher capital requirements.
The changes are in line with the focus the Group of 20 rich and developing nations is putting on banks that play significant roles in their home countries.
This recent attention on the so-called D-SIBs, or domestically important banks, is a new step following a G20 agreement after the 2008 global financial crisis to impose additional capital requirements on banks deemed systemically important at the global level.
"The measures we are announcing today are designed to limit the likelihood that a major bank would encounter distress or failure that could negatively impact the Canadian economy or taxpayers," Julie Dickson, the head of OSFI, said in a statement.
The Basel Committee on Banking Supervision released a framework in October 2012 to define the D-SIBs, but gave domestic regulators some leeway in classifying the institutions.
OSFI said the five largest Canadian banks, excluding National Bank Financial, account for more than 80 percent of total banking assets, and the six largest comprise almost 90 percent.