OSFI Revises Guideline on Interest Rate Risk Management by Banks
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.
Related Links
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
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
FASB Proposes to Improve Guidance for Certain Financial InstrumentsRelated Articles
BIS Report Notes Existing Gaps in Climate Risk Data at Central Banks
A Consultative Group on Risk Management (CGRM) at the Bank for International Settlements (BIS) published a report that examines incorporation of climate risks into the international reserve management framework.
EBA Publishes Multiple Regulatory Updates for Regulated Entities
The European Banking Authority (EBA) published the final guidelines on liquidity requirements exemption for investment firms, updated version of its 5.2 filing rules document for supervisory reporting, and Single Rulebook Question and Answer (Q&A) updates in July 2022.
APRA Consults on Prudential Standard for Operational Risk
The Australian Prudential Regulation Authority (APRA) is seeking comments, until October 21, 2022, on the introduction of CPS 230, which is the new cross-industry prudential standard on operational risk management.
EC Amends Rule on Securitizations; ESRB Updates Reciprocation Measures
The European Commission published a Delegated Regulation 2022/1301 on the information to be provided in accordance with the simple, transparent, and standardized (STS) notification requirements for on-balance-sheet synthetic securitizations.
APRA Announces Revisions to Capital Framework for Banks
The Australian Prudential Regulation Authority (APRA) is announced revisions to the capital framework for authorized deposit-taking institutions to implement the "unquestionably strong" capital ratios and the Basel III reforms.
EBA Examines Remuneration Data and Use of Large Exposure Exemptions
The European Banking Authority (EBA) published a report that examines the use of certain exemptions included in the large exposures regime under the Capital Requirements Regulation (CRR).
UK Authorities Publish Discussion Paper on Critical Third Parties
The Bank of England (BoE), the Prudential Regulation Authority (PRA), and the Financial Conduct Authority (FCA) published a joint discussion paper that sets out potential measures to oversee and strengthen the resilience of services provided by critical third parties to the financial sector in UK.
BoE Issues Update on Ongoing Data Transformation Program
The Bank of England (BoE) issued a communication to firms to provide an update on the progress of the joint data transformation program—which is being led by BoE, the Financial Conduct Authority (FCA), and the industry—for the financial sector in UK.
EBA Issues Draft Methodology and Templates for 2023 Stress Tests
The European Banking Authority (EBA) published the draft methodology, templates, and template guidance for the European Union-wide stress test in 2023.
EBA Issues SREP Guidelines and Standards for Investment Firms
The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) jointly published the final guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP) for investment firms.