Office of the Superintendent of Financial Institutions
OSFI last wrote to all Standardized Deposit-Taking Institutions (DTIs) on April 12, 2021, communicating our expectations for the 2021 Internal Capital Adequacy Assessment Process (ICAAP) submission and internal audit of the Basel Capital Adequacy Reporting (BCAR).
The purpose of this communication is to confirm the following:
As in the past, OSFI expects DTIs to continue practising prudent capital management, including the use of their ICAAP to identify, quantify and substantiate to their boards the Pillar 2 risks that underpin their target capital levels.
As a starting point for their ICAAP, OSFI expects DTIs to consider the revised capital framework coming into effect in fiscal Q2 2023. Specifically, the required changes to or revalidation of their internal capital targets should account for the increased risk sensitivity, segmentation of requirements, and targeted optionality of the new framework. For instance,
Standardized DTIs are required to assess the impact of the changes to the revised capital framework in their ICAAP, including the need to recalibrate their internal capital targets. On or before
December 31, 2022, DTIs are expected to provide to their Lead Supervisor with the results of this assessment. This package should include an updated ICAAP that supports any recalibration of target capital ratios or continued operations with the existing targets.
The ICAAP package can utilize the scope and format used by the institution, however, the contents of the submission should have a scope that includes the elements in the attached OSFI ICAAP template. DTIs are expected to include the summary quantitative matrix shown in the OSFI template as Appendix A.
By no later than
March 31, 2023, OSFI expects each institution’s Internal Audit function to provide their OSFI Lead Supervisor with a copy of the audit reports on the following:
Should you have any questions or concerns, please contact your OSFI Lead Supervisor.
Jamey Hubbs Assistant Superintendent Deposit-Taking Supervision Sector