Office of the Superintendent of Financial Institutions
OSFI is publishing the final version of Guideline E-23, which establishes OSFI’s expectations for institutions in managing and controlling the use of models, whether for regulatory capital determination, internal risk management, valuation/pricing, business decision-making or stress testing purposes. OSFI believes all Canadian deposit-taking institutions should have model risk management practices that reflect their size and degree of sophistication.
The final Guideline incorporates several revisions based on comments received from industry stakeholders during the public consultation period, which began in December 2016. This consultation included targeted discussions with several foreign bank branches on the proposed scope of coverage. Those discussions have led OSFI to exclude foreign bank branches from the scope of the Guideline, since OSFI believes that it has the capacity to assess model risk management of these institutions within existing supervisory processes. A footnote to the Guideline clarifies the Principal Officer of a foreign bank branch is accountable for ensuring there are appropriate risk controls over model risk, where material. Annex 1 summarizes comments of substance that were received from stakeholders and explains how they have been addressed.
Additionally, OSFI has decided that standardized institutions, as defined in the Guideline, will have until January 1, 2019 to become compliant with this Guideline. All other institutions (i.e. internal models approved institutions) are expected to comply with the Guideline by November 1, 2017.
Questions on the Guideline should be sent to Greg Caldwell, Capital Specialist, Capital Division by email at
Assistant Superintendent Regulation Sector
ANNEX – Summary of Comments Received and OSFI’s Response