OSFI Revises Guideline on Principles for Management of Liquidity Risk
OSFI finalized Guideline B-6 on the principles for the management of liquidity risk. The guideline sets out the OSFI expectations about the management of liquidity risk for banks, bank holding companies, and federally regulated trust and loan companies. Guideline B-6, which was last updated in 2012, describes some of the elements that will be considered by supervisors in assessing the strength of the liquidity risk management framework of an institution and describes some of the information that will be used to assess liquidity adequacy, as appropriate to the scale, complexity, and function of the institution. The final guideline will take effect on January 01, 2020.
Along with the Liquidity Adequacy Requirements (LAR) Guideline, which outlines a set of quantitative liquidity standards and metrics, Guideline B-6 forms the framework under which OSFI assesses the liquidity adequacy of the institutions it supervises. The revisions aim to ensure that the guideline remains current and relevant as well as appropriate for the scale and complexity of institutions. As a result of the supervisory assessments of OSFI, the updated guidance includes additional clarity on the expectations of OSFI regarding the liquidity risk management practices of institutions. The revisions also relate to the new liquidity risk measurement tools that have been introduced in the LAR Guideline in recent years—such as the Liquidity Coverage Ratio, the Net Stable Funding Ratio minimum standards, and the Net Cumulative Cash Flow metric—and were not earlier referenced in Guideline B-6. The appendix provides a summary of comments received from the public consultation and outlines the OSFI responses to these comments. The objective of the revised Guideline B-6 is to ensure that the expectations contained in the guideline for managing liquidity risk at institutions remain sound and current as well as appropriate for the scale and complexity of institutions.
Related Links
Effective Date: January 01, 2020
Keywords: Americas, Canada, Liquidity Risk, Guideline, Liquidity Principles, Basel III, 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.
Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives
Previous Article
SARB Consults on Margin Requirements for Uncleared OTC DerivativesRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
