OSFI Issues Letter on ICAAP Submission and Internal Audit of BCAR
OSFI issued a letter to confirm that a formal Internal Capital Adequacy Assessment Process (ICAAP) submission is not required in 2021. The letter also stated that internal audit of the 2021 Basel Capital Adequacy Reporting (BCAR) return must be submitted by February 28, 2022. OSFI expects the Internal Audit function of each institution to provide a review of the completeness and accuracy of one BCAR submission during the year including, but not limited to, a review of the accurate categorization of risk-weighted assets, completeness of off-balance sheet amounts, and accurate amounts for credit risk mitigation. The letter has been issued to deposit-taking institutions using the Basel standardized approach to credit risk.
While formal ICAAP submission is not required in 2021, OSFI expects that standardized deposit-taking institutions will continue to practice prudent capital management. This includes the continued implementation of their ICAAP program to identify, quantify, and substantiate to their boards the Pillar 2 risks that underpin their target capital levels. OSFI recognizes that increased risks have emerged due to the pandemic and believes that a robust ICAAP enhances the ability of a standardized deposit-taking institution to manage through the current environment and all stages of business cycles. Therefore, OSFI expects standardized deposit-taking institutions to update their ICAAP as part of the annual capital planning process. This should include reconfirmation of internal capital targets. Lead supervisors may request ICAAP documentation as part of the ongoing supervisory review process of OSFI. The OSFI guideline on ICAAP and enterprise-wide model risk management provides further details on the requirement to institute an ICAAP process, including robust model governance for Pillar 2 risk quantification.
Related Links
- Letter
- BCAR Manual and Related Documents
- ICAAP Guidelines
- Guidelines on Enterprise-Wide Model Risk Management
Keywords: Americas, Canada, Banking, Basel, ICAAP, BCAR, Regulatory Capital, Reporting, Standardized Approach, Credit Risk, Pillar 2, 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
FSB Publishes FAQs on Implementation of SFT Data StandardsRelated Articles
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.
DNB Publishes Multiple Reporting Updates for Banks
DNB, the central bank of Netherlands, updated the list of additional reporting requests and published additional data quality checks and XBRL-Formula linkbase documents for the first quarter of 2023.
NBB Sets Out Climate Risk Expectations, Issues Reporting Updates
The National Bank of Belgium (NBB) published a communication on climate-related and environmental risks, issued an update on XBRL reporting
EBA Updates Address Securitization Standards and DGS Guidelines
The European Banking Authority (EBA) published the final draft of the regulatory technical standards that set out conditions for assessment of homogeneity of the underlying exposures in simple, transparent, and standardized (STS) securitizations.
FSB Publishes Letter to G20, Sets Out Work Priorities for 2023
The Financial Stability Board (FSB) published a letter intended for the G20 Finance Ministers and Central Bank Governors, highlighting the work that FSB will take forward under the Indian G20 Presidency in 2023
ISSB Standards May Become Effective from January 2024
The International Organization of Securities Commissions (IOSCO) welcomed the confirmation statement by the International Sustainability Standards Board (ISSB) setting out its progress in the development of its first sustainability-related corporate disclosure standards.
