What changed
The earlier IFR requirement under paragraph 112 of the 2025 Directions has been replaced. The new rule sets a minimum IFR balance of 2% of the combined AFS and FVTPL (including HFT) portfolio, assessed annually as of the balance sheet date. Transfers to IFR must be made from net profit after mandatory appropriations, using realised gains on sale of investments.
What it means for you
Payments banks now have a clearer, simpler IFR target tied to their trading and available-for-sale portfolios. This reduces operational complexity in maintaining the reserve. Banks must ensure annual compliance by transferring realised gains to IFR until the 2% threshold is met, which may impact profit distribution and capital planning.
What you must do
- Recalculate IFR requirement as 2% of AFS and FVTPL (including HFT) portfolio as of each balance sheet date.
- Transfer realised gains on sale of investments to IFR from net profit after mandatory appropriations until the 2% floor is reached.
- Review annual profit appropriation process to ensure IFR transfers are prioritised before other discretionary allocations.
- Update internal policies and systems to track IFR balance against the new portfolio-based threshold.
Who it affects
Payments banks, Treasury and finance teams of payments banks, Compliance and risk management departments
When does this amendment take effect?
The amendment is effective from the date of issue, which is May 18, 2026.