Backgrounder: Final Guideline B-12 – Interest Rate Risk Management
Backgrounder -
Overview
The Office of the Superintendent of Financial Institutions (OSFI) is publishing the final Guideline B-12 – Interest Rate Risk Management. Interest rate movements can affect an institution’s earnings, capital, and financial resilience. The guideline sets expectations for how institutions identify, measure, monitor, and manage interest rate risk in the banking book.
The amendments update the interest rate shock scenarios institutions use to assess their exposure. They also clarify expectations for measuring how interest rate changes affect earnings. These changes align with the Basel Committee on Banking Supervision’s 2024 targeted amendments and support more consistent and comparable risk assessments across institutions. The amendments also strengthen the consistency and comparability of how institutions measure and manage interest rate risk, supporting the resilience of Canada's financial system.
OSFI considered feedback received during public consultation in finalizing the guideline. Stakeholders were broadly supportive of updating the shock scenarios to reflect evolving market conditions and international standards.
Why it’s important
The revised shock scenarios provide a more current assessment of how significant interest rate movements could affect institutions.
Clearer expectations for earnings-based measures support more consistent risk assessments across institutions. A constant balance sheet approach is the minimum expectation for assessing earnings sensitivity.
Removing disclosure requirements from Guideline B-12 reduces duplication. Institutions will continue to report this information through OSFI’s Pillar 3 disclosure framework.
Next steps
For institutions with an October 31 fiscal year-end, the guideline takes effect on November 1, 2026. For institutions with a December 31 fiscal year-end, it takes effect on January 1, 2027.
OSFI plans to finalize the draft amendment to the Pillar 3 Disclosures for interest rate risk guidelines on November 19, 2026 after further consideration of stakeholder feedback.