OSFI issues proposed regulatory changes to the treatment of credit valuation adjustments

News release

For immediate release

OTTAWA ─ June 18, 2021 ─ Office of the Superintendent of Financial Institutions

Today the Office of the Superintendent of Financial Institutions (OSFI) launched an industry consultation on proposed regulatory changes to the treatment of credit valuation adjustments (CVA) and market risk hedges of other valuation adjustments of over-the-counter derivatives referred to as XVA. The proposed revisions affect OSFI’s Capital Adequacy Requirements (CAR) Guideline, Chapter 8 on CVA risk.

Key changes in the draft CAR Guideline, Chapter 8 include: enhanced risk sensitivity, in particular expanded scope of coverage towards market risk factors of CVA; greater robustness by aligning CVA sensitivities with the standardized approach for market risk; and a revised scope of application of OSFI’s CVA capital requirements to only those deposit-taking institutions that are subject to OSFI’s market risk capital requirements.

The proposed changes are a continuation of OSFI’s industry consultation on proposed regulatory changes to incorporate the latest and final round of Basel III reforms into its capital, leverage and related disclosure guidelines for banks announced in March 2021. OSFI’s proposals are in line with the international standards set by the Basel Committee on Banking Supervision (BCBS), while reflecting the Canadian market.

OSFI is seeking input on these proposals until July 30, 2021. OSFI will publish a summary of comments with the release of its final guidance in late 2021.


“These new proposed reforms complement the final set of Basel III reforms and seek to enhance the way institutions calculate risk-weighted assets for derivatives transactions. The changes will improve the comparability and transparency of institutions’ capital ratios and advance a more resilient bank regulatory regime in Canada that protects depositors, maintains market confidence and promotes continued financial stability, especially during times of stress.”

Ben Gully, Assistant Superintendent, Regulation Sector

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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. OSFI supervises more than 400 federally regulated financial institutions and 1,200 pension plans to determine whether they are in sound financial condition and meeting their prudential requirements.

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