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

    PRA and FPC Finalize Changes to Leverage Ratio Framework in UK

    The Prudential Regulation Authority (PRA) published the final policy statement PS21/21 on the leverage ratio framework in the UK. PS21/21, which sets out the final policy of both the Financial Policy Committee (FPC) and PRA

    October 08, 2021 WebPage Regulatory News
    News

    CFPB Proposes Rule on Small Business Lending Data Collection

    The Consumer Financial Protection Bureau (CFPB) proposed to amend Regulation B to implement changes to the Equal Credit Opportunity Act (ECOA) under Section 1071 of the Dodd-Frank Act.

    October 08, 2021 WebPage Regulatory News
    News

    PRA Decides to Maintain O-SII Buffers for Another Year

    The Prudential Regulation Authority (PRA) decided to maintain, at the 2019 levels, the buffer rates for the Other Systemically Important Institutions (O-SII) for another year, with no new rates to be set until December 2023.

    October 08, 2021 WebPage Regulatory News
    News

    FSB Report Assesses Implementation of Recommendations on Stablecoins

    The Financial Stability Board (FSB) published a progress report on implementation of its high-level recommendations for the regulation, supervision, and oversight of global stablecoin arrangements.

    October 07, 2021 WebPage Regulatory News
    News

    APRA Updates Loan Serviceability Expectations for Home Lending

    In a letter to the authorized deposit taking institutions, the Australian Prudential Regulation Authority (APRA) announced an increase in the minimum interest rate buffer it expects banks to use when assessing the serviceability of home loan applications.

    October 06, 2021 WebPage Regulatory News
    News

    CPMI and IOSCO Consult on Guidance on Stablecoin Arrangements

    The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) are consulting on the preliminary guidance that clarifies that stablecoin arrangements should observe international standards for payment, clearing, and settlement systems.

    October 06, 2021 WebPage Regulatory News
    News

    EBA and EIOPA Set Out Work Priorities for 2022

    The European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have set out their respective work priorities for 2022.

    October 05, 2021 WebPage Regulatory News
    News

    MFSA Issues Reporting Updates and Guidance for Banks

    The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0, in addition to the reporting module on leverage under the common reporting (COREP) framework.

    October 05, 2021 WebPage Regulatory News
    News

    EC Publishes Decision on List of Equivalent Third Countries Under CRR

    The European Commission (EC) published the Implementing Decision 2021/1753 on the equivalence of supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures, in accordance with the Capital Requirements Regulation or CRR (575/2013).

    October 04, 2021 WebPage Regulatory News
    News

    EC Rule on Contractual Recognition of Write-Down and Conversion Powers

    EC published the Implementing Regulation 2021/1751, which lays down implementing technical standards on uniform formats and templates for notification of determination of the impracticability of including contractual recognition of write-down and conversion powers.

    October 04, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7552