The Office of the Superintendent of Financial Institutions has spotlighted liquidity preparedness and assessment, capital and single-name concentration risk, interest rate risk management and disclosure, and governance, early intervention, and transparency in its second quarterly release for the year.
The release was held on May 21. It concentrates on the major risks in Canada’s financial system as identified in the OSFI’s "Annual Risk Outlook."
Liquidity preparedness and assessment
The draft Liquidity Adequacy Requirements Guideline (2027) pitches targeted updates enhancing liquidity requirements’ clarity and consistent application while maintaining the requirements’ risk‑based and proportionate nature. The draft Internal Liquidity Adequacy Assessment Process Guideline presents a structure for institutions on assessing, supervising, and reporting on liquidity risks in line with institutions’ size, complexity, and risk profile.
This bolsters the consistency of OSFI's supervisory review of liquidity risk approach.
Capital and single-name concentration risk
The OSFI drafted updates to the capital and liquidity treatment of crypto‑asset exposures to ensure that related risks remain supported by proper protections, as well as updates to Guideline B-2 – Large Exposure Limits for Small and Medium-Sized Banks that affirms the modernity of the framework and its alignment with the current risk environment.
Interest rate risk management and disclosure
The OSFI pitched draft changes to Pillar 3 disclosure expectations on interest rate risk in the banking book, which are expected to boost transparency and back market discipline. It also proposed target adjustments to Guideline B‑12 – Interest Rate Risk Management, ensuring that interest rate shock scenarios and methodologies remain up-to-date, risk‑sensitive, and aligned with global standards.
Governance, early intervention, and transparency
The OSFI modified the Guide to Intervention for Federally Regulated Deposit-Taking Institutions in line with its broader integrity and security mandate. The update also aligns the guide with the office’s risk appetite and supervisory framework.
Moreover, the office introduced the public disclosure of crypto-asset exposures to improve transparency in line with Budget 2023. The OSFI is also conducting early analytical work to determine whether the Minimum Capital Test insurance risk factors are still appropriate in the current environment. The factors have generally remained the same for over 10 years.
The OSFI said that in this release, it focused on initiatives supporting core prudential frameworks and a streamlined regulatory environment.
“In a more complex and uncertain environment, a resilient financial system is one of Canada's core strengths. This quarterly release reflects our focus on sound fundamentals, including strong capital, ample liquidity, effective risk governance, and transparency, while taking a disciplined and proportionate approach to supervision,” said Peter Routledge, the financial institutions superintendent, in a statement.
The OSFI will host a virtual Industry Day on the topics covered by the quarterly release on June 4.