Amar Munipalle, Executive Director, Risk Advisory Hub, delivers remarks for OSFI’s Spring – May Quarterly Release Day

Thank you, Christina.

My name is Amar Munipalle, and I am the Executive Director of OSFI’s Risk Advisory Hub.

Thank you for joining us today for our Spring Quarterly Release Day.

Before I begin, I’d like to acknowledge that I am speaking to you from Toronto, on the traditional land of the Mississaugas of the Credit, the Anishinaabeg, the Chippewa, the Haudenosaunee, and the Wendat peoples. This land is also home to many diverse First Nations, Inuit, and Métis peoples. I am grateful to be present in this territory.

This quarter, we are launching three public consultations:

• The first is a consultation on the draft Liquidity Adequacy Requirements (LAR) Guideline (2026);
• The second is a consultation on an Internal Liquidity Adequacy Assessment Process (ILAAP) discussion paper; and
• The third is a consultation on the draft Minimum Capital Test (MCT) Guideline (2026) along with its associated documents.

Additionally, we are issuing a Regulatory Notice on adjustments being made to the Life Insurance Capital Adequacy Test (LICAT) Guideline.

We are doing this work to continuously improve our guidelines so that they remain fit for purpose. The consultations and changes being announced today balance new innovations and modernization within the industry with sound supervisory oversight.

I will now provide more details on these, beginning with the consultations.

Our first consultation pertains to proposed updates to OSFI’s Liquidity Adequacy Requirements (LAR) Guideline. Our LAR Guideline ensures federally regulated banks, bank holding companies, and trust and loan companies can manage their liquidity risk, support withdrawals, and meet payment and settlement obligations, even during periods of instability or stress.

The proposed revisions would introduce new funding categories to better reflect liquidity risks from products such as structured notes and deposits sourced through non-bank financial intermediaries.

The changes would help clarify the appropriate liquidity treatment of products that straddle the line between retail and wholesale classifications.

As a matter of continuously updating our guidelines, we also clarified expectations for products with early redemption characteristics, and removed references to Bankers’ Acceptances and the now discontinued Canadian Dollar Offered Rate (CDOR).

The second consultation that we are beginning today is to gather feedback on our Internal Liquidity Adequacy Assessment Process (ILAAP) discussion paper. In it, we present a case for a more structured approach to the supervisory review process (Pillar 2 liquidity).

In our Annual Risk Outlook, we routinely identify funding and liquidity as important risks facing Canadian deposit‑taking institutions.

These risks can materialize when losses are incurred due to a stress event coupled with institutions holding insufficient liquidity.

That’s why today, we are launching a 90-day consultation to engage stakeholders, industry, and the public in a dialogue on how we can strengthen our supervisory review process (Pillar 2 liquidity) in Canada and ensure it corresponds with international practices.

Moving on to our third public consultation, which is on the draft Minimum Capital Test Guideline, or MCT.

The MCT ensures property and casualty insurers have enough capital to cover potential losses from risks. It enhances financial stability in the property and casualty insurance industry and clarifies how insurers should apply capital guidelines.

Today we are launching a 90-day consultation on the draft MCT 2026 Guideline, along with its associated documents.

The changes OSFI is proposing today are part of our maintenance process and we are providing clarity on frequent questions we get from the industry. One of our main changes is to simplify the unexpired coverage formula to ensure a consistent interpretation.

On this note, we appreciate our collaboration with the Canadian Institute of Actuaries. They will soon issue further information to assist appointed actuaries and other practitioners in calculating the unexpired coverage.

We have also made minor adjustments to the MCT 2026 Guideline for which there is no impact on capital.

The final MCT 2026 Guideline will be published on November 20, 2025, and will come into effect on January 1, 2026.

Finally, the last item in today’s Quarterly Release is the publication of a Regulatory Notice on adjustments being made to the Life Insurance Capital Adequacy Test (LICAT) Guideline.

Our LICAT Guideline helps us assess an insurer’s financial resilience and, in doing so, helps supervise these institutions effectively.

The Regulatory Notice published today is to inform the industry of adjustments being made to specific sections of the LICAT 2025.

The 5% cap on the reduction in Tier 1 capital deduction for stop-loss reinsurance is now removed to give insurers greater flexibility in using reinsurance to achieve their desired operating capital levels.

In addition, we adjusted the calculation of credit risk and market risk capital requirements for segregated fund guarantees to align with other products. Both updates are part of our regular process to keep these guidelines up to date.

Thank you, I am now ready to answer your questions.