OSFI issues its final guideline on enterprise-wide model risk management

News Release

For immediate release

OTTAWA – September 13, 2017 – The Office of the Superintendent of Financial Institutions Canada

The Office of the Superintendent of Financial Institutions Canada (OSFI) today released the final version of its guideline on Enterprise-wide Model Risk Management, orGuideline E-23. The Guideline has been revised to reflect comments received during the public consultation period, which ended on February 28, 2017.

Deposit-taking institutions are increasingly relying on models for not only regulatory capital determination but also for valuation and business decision-making purposes. Guideline E-23 aims to provide institutions with comprehensive and clear guidance and common standards for enterprise-wide model risk management. It also outlines prudent practices for internal model development, review, approval, use and modification.

This Guideline applies to all models that have a material impact on the risk profile of an institution; for example, models used for regulatory capital determination, internal risk management, valuation/pricing, business decision-making or stress testing purposes.


“Guideline E-23 presents a minimum common standard for model risk management practices while taking into consideration the varying sizes and degrees of complexity of deposit-taking institutions,” said Assistant Superintendent Carolyn Rogers. “OSFI recognizes that the use of models poses different challenges for small and medium-sized institutions than for larger institutions and adjusts its expectations accordingly.”

Quick Facts

  • Foreign bank branches are excluded from the scope of the Guideline. However, OSFI expects the principal officers of foreign bank branches to be accountable for having appropriate risk controls for their models, where material.
  • Standardized institutions have until January 1, 2019, to comply with the Guideline; all other institutions (i.e. institutions that have already received OSFI’s approval to use internal models) are expected to comply with the Guideline by November 1, 2017.

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About OSFI

The Office of the Superintendent of Financial Institutions Canada (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.

Media Contact:
Annik Faucher
OSFI – Public Affairs