Featured Product

    OSFI Issues Letter on 2016-17 ICAAP and Next ICAAP Submissions

    January 17, 2018

    OSFI issued a letter that provides feedback on the 2016-17 Internal Capital Adequacy Assessment Process (ICAAP) Submission. The letter also states that a formal ICAAP submission to OSFI is not required for 2018. The letter is addressed to deposit-taking institutions that are using the Basel standardized approach to credit risk.

    Based on the review of the ICAAP assessments submitted in December 2016, OSFI identified a number of key themes:

    • Real Estate Downturn Stress Test. Results of the required real estate stress test varied, given the different methodologies and assumptions used by each institution. A number of standardized deposit-taking institutions reported immaterial real estate downturn impact relative to their uninsured mortgage portfolio. OSFI encourages institutions to reassess their results for reasonability, given the nature of their respective portfolio and the overall impact on the level of impaired loans that would likely accompany a severe real estate downturn.
    • Assessment and Documentation of Risks. A number of ICAAPs did not provide sufficient detail on the risk assessment and quantification used to determine the internal capital target. Furthermore, rationale was not always provided in cases where the impact of stress test results was not factored into capital allocation.
    • Determination of Internal Capital Target. OSFI continues to observe misalignment of board-approved capital targets and ICAAP capital requirements for some standardized deposit-taking institutions.

    OSFI expects that, in 2018, standardized deposit-taking institutions will update their ICAAP as part of their annual planning process, to assist the capital planning process, including the re-confirmation of internal capital targets. Furthermore, Lead Supervisors may request to review the ICAAP of an institution, as part of the ongoing supervisory process. Further communication will be sent to the industry in late 2018, providing more guidance on the next ICAAP submission as well as OSFI’s expectations of internal audit coverage for ICAAP and Basel Capital Adequacy Reporting (BCAR). OSFI has been informing standardized deposit-taking institutions of its expectations with respect to the Pillar 2 implementation, the submission requirements of ICAAP, and the expectations for internal audits of both the ICAAP and BCAR submissions. OSFI has received six rounds of ICAAP submissions to date.

    Related Link: OSFI Letter

    Keywords: Americas, Canada, ICAAP, BCAR, Pillar 2, Basel III, Stress Testing, OSFI

    Featured Experts
    Related Articles

    EBA Finalizes Templates for One-Off Climate Risk Scenario Analysis

    The European Banking Authority (EBA) has published the final templates, and the associated guidance, for collecting climate-related data for the one-off Fit-for-55 climate risk scenario analysis.

    November 28, 2023 WebPage Regulatory News

    EBA Mulls Inclusion of Environmental & Social Risks to Pillar 1 Rules

    The European Banking Authority (EBA) recently published a report that recommends enhancements to the Pillar 1 framework, under the prudential rules, to capture environmental and social risks.

    October 31, 2023 WebPage Regulatory News

    BCBS Consults on Disclosure of Crypto-Asset Exposures of Banks

    As a follow on from its prudential standard on the treatment of crypto-asset exposures, the Basel Committee on Banking Supervision (BCBS) proposed disclosure requirements for crypto-asset exposures of banks.

    October 19, 2023 WebPage Regulatory News

    BCBS and EBA Publish Results of Basel III Monitoring Exercise

    The Basel Committee on Banking Supervision (BCBS) and the European Banking Authority (EBA) have published results of the Basel III monitoring exercise.

    October 18, 2023 WebPage Regulatory News

    PRA Updates Timeline for Final Basel III Rules, Issues Other Updates

    The Prudential Regulation Authority (PRA) recently issued a few regulatory updates for banks, with the updated Basel implementation timelines being the key among them.

    October 18, 2023 WebPage Regulatory News

    US Treasury Sets Out Principles for Net-Zero Financing

    The U.S. Department of the Treasury has recently set out the principles for net-zero financing and investment.

    October 17, 2023 WebPage Regulatory News

    EC Launches Survey on G7 Principles on Generative AI

    The European Commission (EC) launched a stakeholder survey on the draft International Guiding Principles for organizations developing advanced artificial intelligence (AI) systems.

    October 14, 2023 WebPage Regulatory News

    ISSB Sustainability Standards Expected to Become Global Baseline

    The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.

    September 18, 2023 WebPage Regulatory News

    IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance

    Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.

    September 18, 2023 WebPage Regulatory News

    BCBS Assesses NSFR and Large Exposures Rules in US

    The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.

    September 14, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8938