Proposed Operational Risk Capital Data Management Expectations

Document Properties

  • Type of Publication: Letter
  • Date: June 18, 2021
  • To:
    • Banks
    • Bank Holding Companies
    • Federally Regulated Trust and Loan Companies

OSFI is releasing for consultation two documents on the proposed management of operational risk capital dataFootnote 1 for institutions required, or those applying, to use the Basel III Standardized Approach for Operational Risk (“SA”) capital in Canada:

  1. Data Maintenance Expectations for Institutions Using the Standardized Approach for Operational Risk Capital Data (“DME”); and
  2. Assessment Tool - Operational Risk Capital Data (“AT”)

The DME outlines data management principles that OSFI expects institutions using the SA to adhere to, which includes the Basel Committee on Banking Supervision’s Principles for Effective Risk Data Aggregation and Risk Data Reporting (“RDARR”). The AT summarizes OSFI’s detailed expectations based on Chapter 3 of the draft Capital Adequacy Requirements GuidelineFootnote 2, RDARR principles, and the DME. Together, the DME and AT aim to ensure that institutions have effective management of current and historical operational risk capital data.

In addition, OSFI has reviewed the existing implementation notes and self-assessment templates for institutions using TSA/AMA in light of the new requirements for the Basel III SA. Many of the qualifying requirements for TSA/AMA (e.g., scenario analysis, external data, business environment and internal control factors etc.) are not part of the new SA, which uses internal operational loss data as a direct input as part of the capital charge calculation. Moreover, many of the operational risk management expectations found in the implementation notes have been updated and incorporated into other Basel standards as well as OSFI guidance (e.g., Guideline E-21: Operational Risk management; and the Corporate Governance Guideline).

As such, we are proposing to rescind the existing governanceFootnote 3 and data maintenanceFootnote 4 implementation notes for AMA/TSA institutions as well as the TSA & AMA Self-assessment TemplateFootnote 5 upon implementation of the revised CAR guideline in 2023. These would be replaced by the aforementioned proposed DME and related AT.

Please provide comments on the DME and AT by July 30, 2021. Questions and comments may be addressed via email at datamaintenance-tenuedesdonnees@osfi-bsif.gc.ca.

Sanjiv Talwar
Assistant Superintendent
Risk Support Sector

Footnotes

Footnote 1

Operational Risk Capital data includes internal operational risk loss data and the components of the Business Indicator that are used to calculate operational risk capital.

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Footnote 2

Draft CAR Chapter 3 - Operational Risk

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Footnote 3

Implementation note on governance expectations (2006)

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Footnote 4

Implementation note on data maintenance principles for operational risk (2006)

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Footnote 5

TSA & AMA self-assessment template. The template is divided into two worksheets: Operational Risk Management (“ORM”) Practices and AMA Methodology.

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