MCAN’s lending activities are supported by a risk appetite statement that is developed as part of our strategic planning process. The risk appetite takes into account our MIC structure and the limitations imposed by the Income Tax Act (Canada) as well as regulatory requirements of OSFI and CDIC. At all times we manage our investment operations to qualify as a MIC to allow tax efficient distributions to our shareholders. Key limits that we adhere to are:
- A liabilities to capital ratio of 5:1 (or an assets to capital ratio of 6:1), based on our non-consolidated balance sheet measured at its tax value.
- 67% of our non-consolidated assets measured on a tax basis are required to be in cash or cash equivalents and residential mortgages.
- Internal target minimum Tier 1 and Total capital ratios of 20% compared to OSFI guidelines for federally regulated companies for capital adequacy of a minimum regulatory capital to risk-weighted assets ratio of 10.5% for Total capital and 7% for Tier 1 capital.