OSFI revised the Guideline B-12 on interest rate risk management and published impact analysis statement on the guideline. The guideline provides a risk control framework for deposit-taking institutions to follow in identifying, assessing, and managing their interest rate risk. The revised version of Guideline B-12 will take effect from January 01, 2020 for domestic systemically important banks (D-SIBs) and from January 01, 2021 for other deposit-taking institutions. The current version of Guideline B-12 remains effective for non-D-SIBs until December 31, 2020.
OSFI had, in October 2018, issued a public consultation on revisions to the guideline on the interest rate risk in the banking book (IRRBB). The cover letter to the final guideline contains a summary of material comments received from stakeholders and an explanation of how they have been addressed. The key updates to OSFI Guideline B-12 include the following:
- Additional guidance for the IRRBB governance processes of institutions
- Expectations for the measurement of IRRBB, the development of stress and shock scenarios, and the key behavioral and modeling assumptions institutions should consider
- Introduction of an outlier/materiality test that compares the maximum loss of an institution to its capital base under the prescribed scenarios
The updated guideline reflects international sound practices, as outlined in the 2016 BCBS framework for IRRBB. The OSFI guideline incorporates most of the BCBS guidance to reflect changes in the market; the methods expected to be used by deposit-taking institutions for measuring, managing, and monitoring IRRBB; and updates related to supervisory practices. The revised expectations will ensure that the OSFI standards for measuring and monitoring IRRBB are comprehensive and reflect sound practices. OSFI's application of the Guideline B-12 will be commensurate with each institution's nature, size, business, and complexity as well as its structure, economic significance, and the level of inherent interest rate risk.
Effective Date: January 01, 2020 (D-SIBs); January 01, 2021 (Others)
Keywords: Americas, Canada, Banking, Basel III, IRRBB, Interest Rate Risk, Guideline B-12, OSFI
Previous ArticleFASB Proposes to Improve Guidance for Certain Financial Instruments
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
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.
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.
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.
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.
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.
The European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) have set out their respective work priorities for 2022.
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.
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).
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.