The Office of the Superintendent of Financial Institutions (OSFI) recently confirmed that the minimum qualifying rate for uninsured mortgages will remain the greater of the mortgage contract rate plus 2.00% or 5.25%. OSFI reviews and communicates the minimum qualifying rate at least every December. OSFI also issued a letter on the use of standardized approach for operational risk capital by Category 1 Small and Medium-Size Deposit-Taking Institutions (SMSBs). OSFI revised the Capital Adequacy Requirements (CAR) Guideline, of which the Chapter 3—Operational Risk—stipulates that the Category I SMSBs with Annual Adjusted Gross Income greater than $1.5 billion must use the Standardized Approach when determining their operational risk capital charge. Additionally, Category I SMSBs with Annual Adjusted Gross Income of less than $1.5 billion will, by default, use the Simplified Standardized Approach but may apply to OSFI for the use of the Standardized Approach if they have a minimum of five years of high-quality internal operational risk loss data.
To support the implementation of the Standardized Approach, OSFI has developed data maintenance expectations and a related assessment tool for operational risk capital data used in the Standardized Approach. Operational risk data includes both internal operational risk loss data and the components of the Business Indicator that are used to calculate operational risk capital. The letter sets out the general application and assessment process that Category I SMSBs with less than $1.5 billion of Annual Adjusted Gross Income need to follow in seeking approval from OSFI to use the Standardized Approach. If approved, these institutions will have their Internal Loss Multiplier (ILM) floored at one until OSFI can confirm that the institution has 10 years of high-quality internal operational risk loss data. For a Category I SMSB with less than $1.5 billion of Annual Adjusted Gross Income and 10 years of internal loss data, OSFI may require the ILM to be adjusted (floored at one or greater than one) based on its assessment of the quality of the institution’s internal operational risk loss data. Starting from June 01, 2022,
Category I SMSBs with five or more years of high-quality internal operational risk loss data may submit applications to OSFI for approval to use the Standardized Approach. Applications will be reviewed in the order in which they are received. All applications must include the following information:
- Completed self-assessment against the Assessment Tool— Operational Risk Capital Data;
- Completed form L3 providing details of internal loss data for each of the years available up to a maximum of 10 years (only at the consolidated level; line of business can be excluded);
- Completed 2023 Basel Capital Adequacy Reporting (BCAR) schedule for operational risk capital for the most recent quarter using the Simplified Standardized Approach; and
- Completed 2023 BCAR schedule for operational risk capital for the most recent quarter using the Standardized Approach
The draft Operational Risk Capital Data Management Expectations and the related Assessment Tool were issued for public consultation in June 2021. OSFI expects to release the final version of these documents in early 2022, which should be used for the application. The consultation on the draft BCAR was issued in May 2021, with OSFI expecting to release the final version of BCAR in early 2022, which should be used for the application.
- Rate for Uninsured Mortgages
- Notice on Standardized Approach
- Proposed Data Management Expectations
- Assessment Tool: Operational Risk Capital Data
- BCAR 2023
- CAR 2023
- Form L3
Keywords: Americas, Canada, Banking, Basel, Regulatory Capital, Operational Risk, CAR Guideline, Standardized Approach, Simplified Standardized Approach, BCAR, SMSBs, Mortgage Lending, Credit Risk, Minimum Qualifying Rate, Uninsured Mortgages, OSFI
Previous ArticleEIOPA Revises LEI Guidelines, Issues Results of Stress Test
The European Commission (EC) published the Delegated Regulation 2022/786 with regard to the liquidity coverage requirements for credit institutions under the Capital Requirements Regulation (CRR).
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying the criteria to identify shadow banking entities for the purposes of reporting large exposures.
The European Insurance and Occupational Pensions Authority (EIOPA) published a report assessing insurers' exposure to physical climate change risks
The Network for Greening the Financial System (NGFS) published two reports to aid central banks and regulators in their oversight of the financial sector and in their central bank operations
The European Commission (EC) published the results of a public consultation, held in October 2021, on the review of the Web Accessibility Directive.
The Monetary Authority of Singapore (MAS) and the SC-STS are jointly consulting, until June 10, 2022, on setting adjustment spreads for the conversion of legacy SOR contracts to SORA reference rate.
The Office of the Superintendent of Financial Institutions (OSFI) published the strategic plan for 2022-2025 and the departmental plan for 2022-23.
The European Banking Authority (EBA) is consulting, until August 31, 2022, on the draft implementing technical standards specifying requirements for the information that sellers of non-performing loans (NPLs) shall provide to prospective buyers.
The European Council and the Parliament reached an agreement on the revised Directive on security of network and information systems (NIS2 Directive).
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying information that crowdfunding service providers shall provide to investors on the calculation of credit scores and prices of crowdfunding offers.