Featured Product

    OSFI Consults on Operational Risk Capital Data Management Expectations

    June 18, 2021

    OSFI published two documents to consult on the management of operational risk capital data for institutions required, or for those applying, to use the Basel III standardized approach for operational risk capital in Canada. The documents set out data maintenance expectations for institutions using the standardized approach for operational risk data and an assessment tool for the operational risk capital data. OSFI also proposed to rescind the existing governance and data maintenance implementation notes for the standardized approach/advanced measurement approach institutions as well as the self-assessment template on implementation of the revised Capital Adequacy Requirements (CAR) guideline in 2023. These would be replaced by the aforementioned proposed data maintenance expectations and the related assessment tool. The comment period for this consultation ends on July 30, 2021.

    The document on data maintenance expectations outlines data management principles that OSFI expects institutions using the standardized approach to adhere to, which include the BCBS principles for effective risk data integration and risk data reporting. These principles include governance, data architecture and IT infrastructure, accuracy and integrity, completeness, timeliness, adaptability, accuracy, comprehensiveness, clarity and usefulness, frequency, and distribution. In addition, OSFI expects that data used in the calculation of operational risk capital institutions will have:

    • Documentation outlining the end-to-end systems and data flows, including key controls for critical failure points, to support the data management processes required to calculate operational risk capital
    • Established policies and documented procedures for the storage, retention, and archiving, including, where applicable, the procedures for logical/physical deletion of loss data and destruction of data storage media and peripherals
    • Processes to maintain backups of relevant data files/stores and databases in a manner that can facilitate ready retrieval in the event of information calls on the institutions’ compliance and ongoing supervisory assessments
    • Processes to ensure that the electronic versions of all relevant data are accessible in a format that provides flexibility to enable searching, aggregation and reporting

    These criteria should be used in assessing, both initially and on an ongoing basis, an institution’s data used in the calculation of operational risk capital. OSFI will consider the institution’s risk profile and complexity when assessing its compliance with these criteria. Additional details on the OSFI expectations can be found in the assessment tool. The assessment tool summarizes the detailed expectations based on Chapter 3 of the draft CAR guideline, Aggregation and Risk Reporting (RDARR) principles, and the data maintenance expectations. Together, the data maintenance expectations and assessment tool aim to ensure that institutions effectively manage the current and historical operational risk capital data.

    In this context, OSFI has reviewed the existing implementation notes and self-assessment templates for institutions using standardized approach/advanced measurement approach, in light of the new requirements for the Basel III standardized approach. The regulator found that many of the qualifying requirements for standardized approach/advanced measurement approach (for example: scenario analysis, external data, business environment, and internal control factors) are not part of the new standardized approach, which uses internal operational loss data as a direct input as part of the capital charge calculation. Moreover, many of the operational risk management expectations found in the implementation notes have been updated and incorporated into other Basel standards as well as OSFI guidance (for example, Guideline E-21 on operational risk management and the corporate governance guideline). Thus, OSFI is proposing to rescind the existing governance and data maintenance implementation notes for the standardized approach/advanced measurement approach institutions as well as the self-assessment template, upon implementation of the revised Capital Adequacy Requirements guideline in 2023.

     

    Related Links

    Comment Due Date: July 30, 2021

    Keywords: Americas, Canada, Banking, Operational Risk, CAR Guideline, Standardized Approach, Reporting, Basel, Regulatory Capital, Data Assessment Tool, OSFI

    Featured Experts
    Related Articles
    News

    HKMA Finalizes Policy Modules on Group-Wide Approach and Remuneration

    The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.

    July 29, 2021 WebPage Regulatory News
    News

    EBA Guide to Monitor Threshold for Intermediate Parent Undertakings

    The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).

    July 28, 2021 WebPage Regulatory News
    News

    PRA Finalizes Approach to Supervision of International Banks

    In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.

    July 26, 2021 WebPage Regulatory News
    News

    FCA Issues PS21/9 on Implementation of Investment Firms Regime

    The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.

    July 26, 2021 WebPage Regulatory News
    News

    EBA Proposes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.

    July 26, 2021 WebPage Regulatory News
    News

    IOSCO Proposes Recommendations on ESG Ratings and Data Providers

    The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.

    July 26, 2021 WebPage Regulatory News
    News

    ESMA Group Issues Recommendations on RFR Switch in Interdealer Market

    The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.

    July 26, 2021 WebPage Regulatory News
    News

    ECB Study Assesses Impact of Basel III Finalization Package

    The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.

    July 26, 2021 WebPage Regulatory News
    News

    ISDA Finds FRTB Results in Higher Capital Charges for Carbon Trading

    The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.

    July 26, 2021 WebPage Regulatory News
    News

    PRA Updates Remuneration Policy Statement Templates and Tables

    The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.

    July 26, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7307