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    OSFI Consults on Revised Principles for Management of Liquidity Risk

    July 18, 2019

    OSFI proposed revisions to Guideline B-6 on the principles for the management of liquidity risk. The guideline sets out the OSFI expectations about the management of liquidity risk for banks, bank holding companies, and federally regulated trust and loan companies. Guideline B-6, which was last updated in 2012, describes some of the elements that will be considered by supervisors in assessing the strength of the liquidity risk management framework of an institution and describes some of the information that will be used to assess liquidity adequacy, as appropriate to the scale, complexity, and function of the institution. Comment period on the consultation ends on September 13, 2019 and OSFI is targeting implementation of the proposed revisions to Guideline B-6 for January 01, 2020.

    Along with the Liquidity Adequacy Requirements (LAR) Guideline, which outlines a set of quantitative liquidity standards and metrics, Guideline B-6 forms the framework under which OSFI assesses the liquidity adequacy of the institutions it supervises. The proposed changes aim to ensure that the guideline remains current and relevant as well as appropriate for the scale and complexity of institutions. As a result of the supervisory assessments of OSFI, the updated guidance includes additional clarity on the expectations of OSFI regarding the liquidity risk management practices of institutions. The revisions also relate to the new liquidity risk measurement tools that have been introduced in the LAR Guideline in recent years—such as the Liquidity Coverage Ratio, the Net Stable Funding Ratio minimum standards, and the Net Cumulative Cash Flow metric—and are not currently referenced in Guideline B-6. The objective of the proposed changes to Guideline B-6 is to ensure that the expectations contained in the guideline for managing liquidity risk at institutions remain sound and current as well as appropriate for the scale and complexity of institutions.

     

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    Comment Due Date: September 13, 2019

    Effective Date: January 01, 2020

    Keywords: Americas, Canada, Banking, Liquidity Risk, Guideline, Liquidity Principles, Basel III, OSFI

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