Backgrounder: Draft Internal Liquidity Adequacy Assessment Process (ILAAP) Guideline

Overview

The Office of the Superintendent of Financial Institutions (OSFI) is launching a 90-day public consultation on the draft Internal Liquidity Adequacy Assessment Process (ILAAP) Guideline. The guideline sets out a clear structure for how institutions should assess, manage, and report on their liquidity risks, beyond minimum regulatory requirements. It also helps OSFI take a more consistent approach when supervising liquidity risk.

An institution's ILAAP is a key part of OSFI's supervisory review approach for liquidity risk. ILAAP complements existing liquidity standards by focusing on each institution's own assessment of its liquidity needs and risks, including how well it can withstand periods of financial stress, taking into account its business model and risk profile.

The draft guideline builds on OSFI's earlier ILAAP discussion paper, feedback received through stakeholder engagement, supervisory experience, and lessons learned from past market stress events.

Expectations are proportionate and reflect each institution's size, complexity, and risk profile. OSFI is also proposing a three‑year phased implementation approach, starting with foundational elements and expanding over time.

Why it's important

Minimum regulatory liquidity ratios play an essential role in promoting resilience, but they cannot capture all liquidity risks faced by individual institutions.

The ILAAP strengthens liquidity risk management by encouraging institutions to take a forward‑looking and institution‑specific view of their liquidity position including under stress. ILAAPs also give OSFI a clearer and more consistent basis for assessing whether institutions are managing liquidity risk in a way that supports their business models and risk profiles.

By formalizing expectations for an institution's ILAAP, OSFI aims to:

• promote stronger internal governance, oversight, and decision‑making around liquidity risk
• improve transparency and consistency in supervisory assessments
• support the continued resilience and stability of the Canadian banking system

Next steps

The consultation is open until August 19, 2026. Stakeholders can submit comments to Consultations@osfi-bsif.gc.ca.

OSFI proposes a phased implementation schedule, beginning in May 2027 and build to maturity by 2029 fiscal year-end.