ICAAP Expectations and BCAR Audit Requirements

​Document Properties

  • Type of Publication: Letter
  • Date: April 12, 2021
  • To: DTIs using the Basel Standardized Approach to Credit Risk

OSFI last wrote to all Standardized Deposit-Taking InstitutionsFootnote 1 (DTIs) on October 23, 2018, communicating our expectations for the 2019 ICAAP submission and internal audit of BCAR.

The purpose of this communication is to confirm that:

  • OSFI will not require a formal ICAAP submission in 2021; and
  • OSFI will require Standardized DTIs to file an internal audit of their BCAR return by February 28, 2022.

ICAAP Expectations

While Standardized DTIs are not required to submit a formal ICAAP for 2021, 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 recognizes that increased risks have emerged due to the pandemic and believes that a robust ICAAP enhances a Standardized DTI’s ability to manage through the current environment and 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 reconfirmation 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 2021 BCAR return must be submitted to OSFI by February 28, 2022.

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,

Jamey Hubbs
Assistant Superintendent
Deposit-Taking Supervision Sector


Footnote 1

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

Return to footnote 1