SOLUS TRUST COMPANY COMPAGNIE SOLUS TRUST
(The “Company”)
Statement of Regulatory Capital and Related Risk
Financial instruments
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. For the purposes of this disclosure, the Company separates market risk into three categories: fair value risk, interest rate risk and currency risk.
1. Fair value risk:
The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities approximate their fair value due to their short-term nature.
Interest rate risk is the risk the value of future cash flows of a financial instrument will fluctuate due to changes in market interest rates. As at December 31, 2022 the Company had no significant exposure to interest rate risk.
3. Currency risk:
Currency risk arises from the possibility that changes in the price of foreign currencies will result in losses.
As at December 31, 2022, the Company’s financial assets and financial liabilities are primarily denominated in Canadian dollars. As a result, the Company is not significantly exposed to currency risk.
Credit Risk
Credit risk is the risk associated with the inability of a third party to fulfill its payment obligations. The Company is exposed to credit risk relating to its cash and accounts receivable. The Company’s maximum credit risk exposure correspond to the carrying value of these financial assets.
All cash balances are held with financial institutions with credit ratings of A or above as rated by Standard & Poor’s.
Liquidity Risk
Liquidity risk is the risk that the Company will be unable to meet a demand for cash to fund its obligations as they come due. The Company’s management oversees the Company’s liquidity to ensure it has access to enough readily available funds to cover its financial obligations as they come due and sustain its normal operations and future growth.
The contractual maturities of the Company’s financial liabilities are all due within one year.
Regulatory Capital
The Company is subject to the regulatory capital requirements imposed by the OSFI and has capital management policies, procedures and controls to ensure compliance with these capital requirements are maintained. The Company maintains a very low liquidity risk tolerance by keeping regulatory capital invested primarily in Government of Canada issues.
The Company’s Tier 1 regulatory capital and capital ratios are published on the OSFI website and can be viewed here. The Company does not have Tier 2 or Tier 3 capital.
As at, and for the year ended December 31, 2022, the Company was in compliance with the capital requirements which include the following:
Capital Adequacy Requirements
Under the Capital Adequacy Requirements (“CAR”) as issued by the OSFI, the Company is required to maintain certain capital ratios using an approach with risk-weighted assets and defined formulas for determining those ratios. For the 2022 period, the Company was required to maintain minimum Common equity tier 1 (“CET1”) ratio of 7.0%, a Tier 1 capital ratio of 8.5% and a Total capital ratio of 10.5%. The Company’s capital ratios have been calculated as follows for the period ended December 31, 2022:
Frequency of disclosure
As a smaller less complex institution with a stable risk profile, Solus Trust Company reports these qualitative and quantitative disclosures annually, as at its fiscal year.