ICAAP Submission in 2019

Document Properties

  • Type of Publication: Letter
  • Date: ​October 23, 2018
  • To: DTIs using the Basel Standardized Approach to Credit Risk

OSFI last wrote to all Standardized Deposit Taking InstitutionsFootnote 1 (DTIs) on January 17, 2018, providing high level observations regarding OSFI’s 2016-17 ICAAP review and advising that timelines would be provided regarding the next ICAAP submissions.

The purpose of this communication is to confirm that:

  1. OSFI will not require a formal ICAAP submission in 2019; and
  2. OSFI will require Standardized DTIs to file an internal audit of their BCAR return by February 29, 2020.

ICAAP Expectations

While Standardized DTIs are not required to submit a formal ICAAP for 2019, OSFI expects that institutions will continue to practice prudent capital management. This includes the continued implementation of their ICAAP program to identify, quantify and substantiate to their boards the Pillar 2 risks that underpin their target capital levels.

Standardized DTIs should treat the ICAAP as an important internal process rather than as a “regulatory” exercise. OSFI believes that a robust ICAAP enhances a Standardized DTI’s ability to manage through all stages of business cycles. Therefore, OSFI expects Standardized DTIs to update their ICAAP as part of their annual capital planning process. This should include re-confirmation of internal capital targets. Lead Supervisors may request ICAAP documentation as part of OSFI’s ongoing supervisory review process.

OSFI guidelines E-19 Internal Capital Adequacy Assessment Program and E-23 Enterprise-Wide Model Risk Management provide further detail on the requirement to institute an ICAAP process, including robust model governance for Pillar 2 risk quantification.

Internal Audit Review of BCAR

The next set of internal audits of the 2019 BCAR return must be submitted to OSFI by February 29, 2020.

As with previous practice, OSFI expects each institution’s Internal Audit function to provide their OSFI Lead Supervisor with the following audit:

A review of the completeness and accuracy of one BCAR submission during the year including, but not limited to, a review of the following:

  • Accurate categorization of Risk-Weighted Assets,
  • Completeness of Off-Balance Sheet amounts, and
  • Accurate amounts for credit risk mitigation (CRM).

Should you have any questions or concerns, please contact your OSFI Lead Supervisor.

Yours sincerely,

James Hubbs
Deputy Superintendent
Supervision Sector

Footnotes

Footnote 1

Deposit Taking Institutions using the standardized approach to Pillar 1 capital levels.

Return to footnote 1