OSFI announced that the deposit-taking institutions using the Basel standardized approach to credit risk will not be required to submit a formal Internal Capital Adequacy Assessment Process (ICAAP) for 2019. However, the deposit-taking institutions should continue implementing and updating their ICAAP programs to identify, quantify, and substantiate to their boards the Pillar 2 risks that underpin their target capital levels. Regarding internal audit review of the 2019 Basel Capital Adequacy Reporting (BCAR) return, the deposit-taking institutions must submit their audit reports by February 29, 2020.
Standardized deposit-taking institutions should treat the ICAAP as an important internal process rather than as a “regulatory” exercise. OSFI believes that a robust ICAAP enhances a standardized deposit-taking institution's ability to manage through all stages of business cycles. Therefore, OSFI expects standardized deposit-taking institutions to update their ICAAP as part of their annual capital planning process. This should include re-confirmation of internal capital targets. Lead Supervisors may request ICAAP documentation as part of the ongoing supervisory review process of OSFI. OSFI guidelines E-19 Internal Capital Adequacy Assessment Program and E-23 Enterprise-Wide Model Risk Management provide further detail on the requirement to institute an ICAAP process, including robust model governance for Pillar 2 risk quantification.
Furthermore, the next set of internal audits of the 2019 BCAR return must be submitted to OSFI by February 29, 2020. As with the previous practice, OSFI expects each institution’s Internal Audit function to provide their OSFI Lead Supervisor with a review of the completeness and accuracy of one BCAR submission during the year including, but not limited to, a review of the following:
- Accurate categorization of risk-weighted assets
- Completeness of Off-Balance Sheet amounts
- Accurate amounts for credit risk mitigation
Keywords: Americas, Canada, Banking, ICAAP, BCAR, Pillar 2, Stress Testing, OSFI
APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.
ESAs (EBA, EIOPA, and ESMA) published the first joint report that assesses risks in the financial sector since the outbreak of the COVID-19 pandemic.
BoE and HM Treasury confirmed that the COVID Corporate Financing Facility (CCFF) will close for new purchases of commercial paper, with effect from March 23, 2021.
ECB published a decision allowing the euro area banks under its direct supervision to exclude certain central bank exposures from the leverage ratio.
ESAs launched a survey seeking feedback on the presentational aspects of product templates under the Sustainable Finance Disclosure Regulation (SFDR or Regulation 2019/2088).
ECB published input of the European System of Central Banks (ESCB) into the EBA feasibility report on reducing the reporting burden for banks in EU.
EC adopted a decision determining, for a limited period of time, that the regulatory framework applicable to central counterparties, or CCPs, in the UK and Northern Ireland is equivalent to the requirements laid down in the European Market Infrastructure Regulation (EMIR or Regulation 648/2012).
EBA has decided to phase out the guidelines on legislative and non-legislative moratoria of loan repayments, in accordance with the earlier specified end of September deadline.
EBA published an Opinion addressed to EC to raise awareness about the opportunity to clarify certain issues related to the definition of credit institution in the upcoming review of the Capital Requirements Directive and Regulation (CRD and CRR).
ECB finalized the guide on assessment methodology for the internal model method for calculating exposure to counterparty credit risk (CCR) and the advanced method for own funds requirements for credit valuation adjustment (A-CVA) risk.