Featured Product

    OSFI Consults on Operational Risk Capital Data Management Expectations

    June 18, 2021

    OSFI published two documents to consult on the management of operational risk capital data for institutions required, or for those applying, to use the Basel III standardized approach for operational risk capital in Canada. The documents set out data maintenance expectations for institutions using the standardized approach for operational risk data and an assessment tool for the operational risk capital data. OSFI also proposed to rescind the existing governance and data maintenance implementation notes for the standardized approach/advanced measurement approach institutions as well as the self-assessment template on implementation of the revised Capital Adequacy Requirements (CAR) guideline in 2023. These would be replaced by the aforementioned proposed data maintenance expectations and the related assessment tool. The comment period for this consultation ends on July 30, 2021.

    The document on data maintenance expectations outlines data management principles that OSFI expects institutions using the standardized approach to adhere to, which include the BCBS principles for effective risk data integration and risk data reporting. These principles include governance, data architecture and IT infrastructure, accuracy and integrity, completeness, timeliness, adaptability, accuracy, comprehensiveness, clarity and usefulness, frequency, and distribution. In addition, OSFI expects that data used in the calculation of operational risk capital institutions will have:

    • Documentation outlining the end-to-end systems and data flows, including key controls for critical failure points, to support the data management processes required to calculate operational risk capital
    • Established policies and documented procedures for the storage, retention, and archiving, including, where applicable, the procedures for logical/physical deletion of loss data and destruction of data storage media and peripherals
    • Processes to maintain backups of relevant data files/stores and databases in a manner that can facilitate ready retrieval in the event of information calls on the institutions’ compliance and ongoing supervisory assessments
    • Processes to ensure that the electronic versions of all relevant data are accessible in a format that provides flexibility to enable searching, aggregation and reporting

    These criteria should be used in assessing, both initially and on an ongoing basis, an institution’s data used in the calculation of operational risk capital. OSFI will consider the institution’s risk profile and complexity when assessing its compliance with these criteria. Additional details on the OSFI expectations can be found in the assessment tool. The assessment tool summarizes the detailed expectations based on Chapter 3 of the draft CAR guideline, Aggregation and Risk Reporting (RDARR) principles, and the data maintenance expectations. Together, the data maintenance expectations and assessment tool aim to ensure that institutions effectively manage the current and historical operational risk capital data.

    In this context, OSFI has reviewed the existing implementation notes and self-assessment templates for institutions using standardized approach/advanced measurement approach, in light of the new requirements for the Basel III standardized approach. The regulator found that many of the qualifying requirements for standardized approach/advanced measurement approach (for example: scenario analysis, external data, business environment, and internal control factors) are not part of the new standardized approach, which uses internal operational loss data as a direct input as part of the capital charge calculation. Moreover, many of the operational risk management expectations found in the implementation notes have been updated and incorporated into other Basel standards as well as OSFI guidance (for example, Guideline E-21 on operational risk management and the corporate governance guideline). Thus, OSFI is proposing to rescind the existing governance and data maintenance implementation notes for the standardized approach/advanced measurement approach institutions as well as the self-assessment template, upon implementation of the revised Capital Adequacy Requirements guideline in 2023.

     

    Related Links

    Comment Due Date: July 30, 2021

    Keywords: Americas, Canada, Banking, Operational Risk, CAR Guideline, Standardized Approach, Reporting, Basel, Regulatory Capital, Data Assessment Tool, OSFI

    Featured Experts
    Related Articles
    News

    EC to Defer Application of SFDR Standards Till July 2022

    The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.

    July 23, 2021 WebPage Regulatory News
    News

    BoE Consults on Approach to Setting MREL, Publishes Bail-In Guidance

    The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.

    July 22, 2021 WebPage Regulatory News
    News

    EBA Seeks Views on Proportionality Assessment Methodology

    The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.

    July 22, 2021 WebPage Regulatory News
    News

    US Agencies Propose Changes to Call Reports and Instructions

    Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.

    July 22, 2021 WebPage Regulatory News
    News

    PRA Finalizes Rulebook Definition of Higher Paid Material Risk-Taker

    The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.

    July 21, 2021 WebPage Regulatory News
    News

    EBA Examines Asset Encumbrance in Banking Sector

    The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.

    July 21, 2021 WebPage Regulatory News
    News

    EBA Publishes Methodological Guide to Mystery Shopping

    The European Banking Authority (EBA) published a methodological guide to mystery shopping.

    July 21, 2021 WebPage Regulatory News
    News

    APRA Issues Update on Capital Reform Policy Settings for Banks

    The Australian Prudential Regulation Authority (APRA) released a letter to authorized deposit-taking institutions to provide an update on key policy settings for the capital framework reforms, which will come into effect from January 01, 2023.

    July 21, 2021 WebPage Regulatory News
    News

    CPMI-IOSCO Assess Continuity Planning of Market Infrastructures

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report that assesses the business continuity planning activities of financial market infrastructures or FMIs.

    July 21, 2021 WebPage Regulatory News
    News

    ESMA Responds to Proposal Related to Sustainability Standards Board

    The European Securities and Markets Authority (ESMA) has responded to the IFRS consultation on targeted amendments to the IFRS Foundation constitution to accommodate an International Sustainability Standards Board (ISSB) to set IFRS Sustainability Standards.

    July 21, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7283