OSFI revised the Guideline B-12 on interest rate risk management and published impact analysis statement on the guideline. The guideline provides a risk control framework for deposit-taking institutions to follow in identifying, assessing, and managing their interest rate risk. The revised version of Guideline B-12 will take effect from January 01, 2020 for domestic systemically important banks (D-SIBs) and from January 01, 2021 for other deposit-taking institutions. The current version of Guideline B-12 remains effective for non-D-SIBs until December 31, 2020.
OSFI had, in October 2018, issued a public consultation on revisions to the guideline on the interest rate risk in the banking book (IRRBB). The cover letter to the final guideline contains a summary of material comments received from stakeholders and an explanation of how they have been addressed. The key updates to OSFI Guideline B-12 include the following:
- Additional guidance for the IRRBB governance processes of institutions
- Expectations for the measurement of IRRBB, the development of stress and shock scenarios, and the key behavioral and modeling assumptions institutions should consider
- Introduction of an outlier/materiality test that compares the maximum loss of an institution to its capital base under the prescribed scenarios
The updated guideline reflects international sound practices, as outlined in the 2016 BCBS framework for IRRBB. The OSFI guideline incorporates most of the BCBS guidance to reflect changes in the market; the methods expected to be used by deposit-taking institutions for measuring, managing, and monitoring IRRBB; and updates related to supervisory practices. The revised expectations will ensure that the OSFI standards for measuring and monitoring IRRBB are comprehensive and reflect sound practices. OSFI's application of the Guideline B-12 will be commensurate with each institution's nature, size, business, and complexity as well as its structure, economic significance, and the level of inherent interest rate risk.
Effective Date: January 01, 2020 (D-SIBs); January 01, 2021 (Others)
Keywords: Americas, Canada, Banking, Basel III, IRRBB, Interest Rate Risk, Guideline B-12, OSFI
Previous ArticleFASB Proposes to Improve Guidance for Certain Financial Instruments
In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.
The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.
The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.
The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.
The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.
The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.
The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.