Canada's Office of the Superintendent of Financial Institutions (OSFI) published a quarterly package of policy and supervisory updates, including final revisions to its Capital Adequacy Requirements Guideline and Guideline E-23 Model Risk Management, an updated Guideline E-15 on appointed actuaries, a report on the Standardized Climate Scenario Exercise, and a revised approach to Administrative Monetary Penalties (AMPs). OSFI also postponed its planned draft Corporate Governance and Accountability Guideline, shifting to a narrower focus on board and senior management accountability. The final Capital Adequacy Requirements Guideline incorporates feedback from a February to April consultation and includes clarifications on mortgage-related underwriting (including that income used to validate ability to pay for one mortgage should not be used for other properties), keeps the existing identification criterion for Income-Producing Residential Real Estate, and clarifies treatment of certain US government-sponsored entities. It also clarifies the treatment of Combined Loan Products where multiple lending products are secured by the same property and gives banks 18 months to implement any required internal model changes, while market risk capital rules are modified to align with the credit risk capital treatment of sovereign exposures. The updated E-23 Guideline applies to all federally regulated financial institutions and to all model types (not just risk management models), remains technology-neutral and scalable, and does not extend to federally regulated pension plans. The climate scenario exercise report, developed with the Autorité des marchés financiers, reflects participation by more than 250 institutions and highlights improved capability to assess climate risk, modeled resilience to physical and transition losses subject to limitations, some concentration and sector vulnerabilities, and the need for better integration of climate risk into underwriting, planning, and enterprise risk management. Guideline E-15 removes content duplicating the Insurance Companies Act and removes the requirement for peer review of an appointed actuary’s work from 1 January 2027, while preserving the Superintendent’s ability to request a review. OSFI’s AMP approach is revised by adding indicia for statutory penalty criteria, lowering tolerance so penalties may be issued at lower levels of negligence and harm, and changing the scaling factor for AMP amounts for small and medium-sized institutions. The final Capital Adequacy Requirements Guideline comes into effect in Q1 2026, defined as 1 November 2025 for institutions with an October year-end and 1 January 2026 for institutions with a December year-end. OSFI expects a consultative document on board and senior management accountability in January 2026.
Office of the Superintendent of Financial Institutions 2025-09-11
Canada's Office of the Superintendent of Financial Institutions issues final Capital Adequacy Requirements and Model Risk Management guidelines and revises administrative monetary penalty approach
Canada's Office of the Superintendent of Financial Institutions (OSFI) released policy updates, including final revisions to the Capital Adequacy Requirements Guideline and Guideline E-23 Model Risk Management. Key changes involve mortgage underwriting clarifications, model risk management applicability, and a revised approach to Administrative Monetary Penalties. OSFI postponed its Corporate Governance Guideline, focusing on board and senior management accountability.