Theresa Hinz, Executive Director of Policy and Risk Response and Amar Munipalle, Executive Director Risk Advisory Hub deliver remarks for OSFI’s September 2025 Quarterly Release Day

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Theresa Hinz:

Thank you, Christina.

My name is Theresa Hinz and I am the Executive Director of Policy and Risk Response. Joining me today is Amar Munipalle, the Executive Director of OSFI's Risk Advisory Hub. I'm speaking to you from Ottawa, on the traditional unceded territory of the Algonquin Anishinaabe people.

Thank you for joining us for our Quarterly Release Day.

Today, the Office of the Superintendent of Financial Institutions is announcing several initiatives that advance our commitment to provide regulatory efficiency. Canada's financial system is navigating a period of profound transformation. The risks facing our institutions—from catastrophic risks to cyber threats and global economic shifts—are more complex and consequential than ever.

In response, we are announcing several updates aimed at focusing OSFI's response to risks, clarifying regulatory expectations, and improving the overall efficiency of its oversight. A strong, stable financial system is not just a safeguard—it's a catalyst for Canada's economic growth.

These initiatives are designed to create efficiency where appropriate, while reinforcing our risk-based, judgment-driven approach to supervision.

We recently shared our updated revised plan on policy, guidance, and supervision.

Specifically, from a policy perspective we are postponing the release of the draft Corporate Governance and Accountability Guideline and, instead, taking a narrower focus on board and senior management accountability, with a consultative document expected in January 2026. This reflects our commitment to an agile, targeted, transparent, and risk-based approach.

This quarter, we announce:

• Final Capital Adequacy Requirements (CAR) Guideline
• Final Guideline E-23 Model Risk Management
• Strengthening Climate Risk Financial Resilience: Insights from the Standardized Climate Scenario Exercise (SCSE)
• Guideline E-15: Appointed Actuary: Legal Requirements, Qualifications and Peer Review
• Letter to industry – Revision of OSFI's approach regarding Administrative Monetary Penalties (AMPs)

Amar will now walk you through the details of the first four releases, and I will return to discuss the final item.

Amar Munipalle:

Thank you, Theresa. I'll start with the Final Capital Adequacy Requirements (CAR) Guideline.

Strong capital levels help institutions manage financial losses during downturns.

The CAR Guideline sets out the capital requirements for financial institutions.  As a prudential regulator we are constantly refreshing our guidelines to better reflect the risks financial institutions face.

The changes we have published today reflect feedback received through the public consultation conducted this spring (Feb-April).

For example, after reviewing feedback, we're clarifying that for borrowers with multiple mortgages, the income used to validate a borrower's ability to pay for one mortgage should not also be used for other properties.

By the same token, we're maintaining the existing identification criterion for Income-Producing Residential Real Estate (IPRRE) to minimize operational burden for institutions.

We clarified the treatment of certain U.S. government-sponsored entities (GSE) to better align with their regulatory treatment in the U.S.

We also clarified the treatment of Combined Loan Products (CLP) where multiple lending products are secured by the same property, and are providing banks with 18 months to implement any required changes into their internal models.

We modified the market risk capital rules to align with the credit risk capital treatment of sovereign exposures.

The final guideline will come into effect in Q1 2026, that is November 1, 2025 for institutions with an October year-end and January 1, 2026 for institutions with a December year-end.

The next piece of guidance I would like to discuss is the Final Guideline E-23 Model Risk Management. 

Model risk is the risk of adverse financial impact due to the design, development, deployment and/or use of models. These risks can affect decision-making, financial stability, and consumer protection.

Today, we are releasing our final updated E-23 Guideline, which, once implemented, will apply to all federally regulated financial institutions.

Additionally, the principles in the guideline will now apply to all types of models, not just those used for risk management.

Expectations in the guideline are all technology neutral and will help financial institutions manage model risks responsibly as they innovate, which fosters a stable financial sector.

The guideline is designed to be scalable and flexible, allowing institutions to apply it proportionally based on their size, complexity, and risk profile.

Lastly on E-23, although we also considered expanding the scope of application to include federally regulated pension plans, we decided against it following a consultation.

This decision reflects differences in the legislative frameworks applicable to federally regulated pension plans compared to financial institutions. And it takes into account OSFI's expectation that plan administrators follow applicable Canadian Association of Pension Supervisory Authorities guidelines for risk management.

We're excited to share with you our Standardized Climate Scenario Exercise (SCSE) report.

In collaboration with the Autorité des marchés financiers (AMF), we developed the Standardized Climate Scenario Exercise to assess potential risks related to climate change, helping to identify vulnerabilities and prepare for future challenges. This joint effort has enhanced national coordination and strengthened Canada's overall climate risk preparedness.

More than 250 financial institutions participated in the Standardized Climate Scenario Exercise (SCSE). They gained hands-on experience in climate scenario analysis and risk assessment.

Some of the insights from the report suggest that:

• the exercise improved the ability of institutions to identify, assess, and measure climate-related risks using standardized frameworks and methodologies
• subject to the modeling limitations of the current exercise, institutions are financially resilient to withstand modeled physical and transition risk losses, indicating that climate-related financial risks are not an immediate threat to financial stability.
  • however, some institutions have exposures to regional physical risk concentration and sectoral vulnerabilities.
• there is a need to improve how climate risk considerations are integrated in underwriting practices, strategic planning, and enterprise risk management

Overall, this work strengthens Canada's financial system by:

• helping financial institutions better understand their potential exposures to climate-related risks
• strengthening institutional capacity to assess and manage climate-related financial risks
• providing OSFI with consistent and comparable data across the sector, which enables a more comprehensive understanding of climate-related vulnerabilities
• informing future supervisory approaches and regulatory expectations

The next item in today's Quarterly Release is Guideline E-15: Appointed Actuary: Legal Requirements, Qualifications and Peer Review.

We've updated Guideline E-15, which outlines the role of the appointed actuary and OSFI's expectation for that role to ensure the safety and soundness of insurers. We've removed all content that repeats requirements set out in the Insurance Companies Act.

We have also removed the requirement for peer review of an appointed actuary's work, effective January 1, 2027, although the Superintendent can request this review, if necessary. These changes will lead to savings for the industry while easing regulatory burden. Until then, the peer review will continue to add value given the relatively recent implementation of IFRS 17.

I'll now turn it back to Theresa to explain the final item that we are releasing today.

Theresa Hinz:

Thank you, Amar. I'll close out the release by outlining the key changes highlighted in the:

• Letter to industry – Revision of OSFI's approach regarding Administrative Monetary Penalties (AMPs)

OSFI is changing its approach to assessing the penalty criteria for institutions when determining the amount of a penalty, which is guided by Section 26 of the OSFI Act.

Key changes to OSFI's approach include:

• incorporating additional indicia for assessing the statutory penalty criteria;
• lowering the tolerance for contraventions such that penalties will be issued when we determine lower levels of negligence and harm; and
• revising the scaling factor to determine appropriate AMP amounts for small and medium-sized financial institutions

These changes align our approach to AMPs with our risk appetite and reflects current risks and regulatory compliance expectations.

We are confident that today's releases continue to modernize our regulatory environment; a key OSFI priority over the past couple years.

Thank you, merci. I will now turn it over to Christina to moderate the Q&A portion.