Draft Liquidity Adequacy Requirements Guideline (2026) and Discussion Paper on Pillar 2 Liquidity and Funding Risks – Letter

Today, we are launching a a 60-day public consultation on draft revisions to the Liquidity Adequacy Requirements (LAR) Guideline. The proposed revisions build on the latest version of the guideline which was published in November 2024. Comments received will inform revisions to the final guideline which we expect to publish as part of the January 2026 Quarterly Release for implementation in 2026.

We are also launching a 90-day public consultation on a discussion paper regarding the design of an Internal Liquidity Adequacy Assessment Process (ILAAP) for Canadian deposit-taking institutions (DTIs). The discussion paper presents a case for a more structured approach to the supervisory review process (or Pillar 2 liquidity). Specifically, the paper seeks views on the introduction of an ILAAP to improve our supervision of DTI liquidity risk, especially risks that are not fully captured by Pillar 1 measures like the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). Comments received will inform future guidance.

Draft 2026 LAR Guideline

The LAR liquidity metrics generally provide more favorable treatment for retail funding compared to wholesale funding. However, as financial markets innovate and evolve, we are observing significant growth in products that straddle the line between retail and wholesale classifications. To ensure consistency and support institutions’ strategic planning, the forthcoming revisions aim to clarify the regulatory treatment of these products. We are proposing to introduce new funding categories to better reflect liquidity risks from products such as structured notes and deposits sourced through non-bank financial intermediaries. The proposed changes impact key regulatory liquidity metrics, including the LCR, NSFR, and the Net Cumulative Cash Flow (NCCF).

Other revisions to the guideline include:

• clarifying expectations for instruments with contingent features and uncertain maturity profiles, particularly in relation to their early redemption characteristics and associated liquidity implications, and
• removing references to Bankers’ Acceptances and Canadian Dollar Offered Rate (CDOR) in light of the cessation of CDOR in June 2024.

Pillar 2 Liquidity and Funding Risks: Designing an ILAAP for Canadian DTIs

The ILAAP discussion paper aims to initiate a dialogue on strengthening the supervisory review process (Pillar 2 liquidity) in Canada. The insights from this consultation will contribute to refining our approach to liquidity supervision, aligning it with international best practices while considering the unique characteristics of the Canadian financial sector. As financial markets continue to evolve, ensuring robust internal liquidity management will be critical for institutions to navigate emerging risks and maintain stability in times of stress.

Stakeholder feedback

Stakeholders who wish to submit comments on the draft 2026 LAR Guideline should send them to Consultations@osfi-bsif.gc.ca by July 22, 2025. A non-attributed summary of comments received along with our responses will be posted on our website alongside the final version of the guideline.

Stakeholders who wish to submit comments on the ILAAP discussion paper and responses to the questions included in the paper, should send them to Consultations@osfi-bsif.gc.ca by August 22, 2025. In making a submission, you acknowledge that we may incorporate your anonymized feedback in a published summary of consultation findings or similar documents.

Sincerely,

Amar Munipalle
Executive Director, Risk Advisory Hub