More than ten years after the roll-out of Basel 2, many lending intuitions in Canada are still using the Standardized Approach (SA) for regulatory reporting. As a consequence, reporting institutions are either setting aside disproportionately higher capital for their loan book, are engaged in regulatory arbitrage by issuing residential real estate loans or are involved in "originate-to-distribute" lending. All of these afore-mentioned consequences contribute to higher systemic risk
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