OSFI issues for public consultation a new draft guideline on enterprise-wide model risk management

News Release

For Immediate Release

OTTAWA December 21, 2016 ─ Office of the Superintendent of Financial Institutions

The Office of the Superintendent of Financial Institutions Canada (OSFI) today released for comment its draft Enterprise-Wide Model Risk Management Guideline, or Guideline E-23.

This proposed new guideline aims to establish a common baseline understanding of OSFI’s expectations of federally regulated deposit-taking institutions around the use of models enterprise-wide. It outlines prudent practices for internal model development, review, approval, use and modification and is applicable to all models that have a material impact on the risk profile of an institution.

The draft guideline takes an enterprise-wide view on model risk, emphasizing that the principles-based guidance be appropriately applied across the entire spectrum of models used by institutions for risk management purposes. The draft guideline outlines OSFI’s expectations for institutions to establish sound policies and practices for an enterprise-wide model risk management framework.

The draft guideline distinguishes between OSFI’s expectations for those institutions that are approved to use internal models for regulatory capital purposes and those that are not. The guidance also considers specific challenges that the usage of models pose for small and medium sized institutions.

The proposed guideline is scheduled to come into force on November 1, 2017.

Quick Facts

  • The expectations outlined in the draft guideline apply to banks, foreign bank branches, bank holding companies, federally regulated trust and loan companies and cooperative retail associations.
  • OSFI is inviting comments on the draft guideline, which it will consider in developing the final guideline. The deadline for receipt of comments is February 28, 2017.
  • The draft guideline was developed with feedback from directed stakeholder consultations with larger deposit-taking institutions and targeted discussions with smaller deposit-taking institutions.
  • A non-attributed summary of industry comments received, along with OSFI’s responses, will be posted on OSFI’s website when the final draft is released.


“With the evolution of banking markets and innovations in banking products, the use of internal models by financial institutions has increased,” said Assistant Superintendent Carolyn Rogers. “As Canadian deposit-taking institutions become more reliant on models, a consistent standard and sound practices for managing and controlling the use of models are needed.”

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About OSFI

The Office of the Superintendent of Financial Institutions (OSFI) is an independent agency of the Government of Canada, established in 1987, to protect depositors, policyholders, financial institution creditors and pension plan members, while allowing financial institutions to compete and take reasonable risks.


Media Contact:

Annik Faucher
OSFI – Public Affairs