## CANADA

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---

### Executive summary: thematic focus and main findings
- FSAP conducted a focused review assessing regulatory and supervisory frameworks through the lens of housing market-related risks; review covered federal jurisdiction and the provinces of British Columbia and Québec and followed up on main recommendations of the 2014 Basel Core Principles (BCP) assessment.
- Seven institutions dominate the DTI sector and account for 84.7 percent of total DTI sector assets.
- Credit unions in British Columbia: FICOM oversees 42 credit unions with total assets of over Can$ 77 billion as of end-2017.
- Desjardins Group in Québec: AMF oversees Desjardins Group with assets of Can$275 billion, and a small stand-alone financial services cooperative.
- OSFI’s supervision of banks remains effective with a high level of compliance with the BCP; approach is conservative, risk-based, forward-looking, includes consolidated and cross-border supervision and regular on-site inspections of significant overseas operations; practices “close touch” supervision emphasizing board and management accountability.
- Residual BCP shortfalls include: OSFI’s lack of de jure independence (BCP 2); an incomplete fit and proper process for new Board appointments (BCP 5); lack of powers over transfer of significant ownership (BCP 6); and limited monitoring of large exposures and related parties (BCPs 19 and 20). The definition of significant interest should be broadened to capture indirect ownership and significant influence.
- Provincial supervisors: AMF is resourced and maintains high regulatory and supervisory standards and has implemented Basel III and a risk-based approach; FICOM lacks operational independence and sufficient resources and has not been able to introduce formal Basel III requirements. Proposed legislative change for FICOM would help address weaknesses.
- Federal-provincial coordination works well in many respects but needs enhancement — improvements warranted in policy development (especially between OSFI and AMF), coordination of data collection, and exchange of prudential information. Authorities should explore removing barriers to closer cooperation.

### Key prudential observations related to housing and mortgages
- Unique Canadian mortgage features (notably five-year contractual periods) are not fully reflected in prudential settings:
  - IFRS9 expected credit losses (ECL) are based on contractual maturity and do not take into account amortization period and possible related renewal risk; a Pillar 2 add-on could be appropriate.
  - Liquidity Coverage Ratio (LCR) inflows assume a 50 percent roll-over rate and may not be sufficiently prudent given mortgage amortization and renewal risk.
  - OSFI’s primary focus on consolidated supervision should be complemented by better monitoring of credit and liquidity risks of material licensed entities.
- Risk weights on mortgage lending:
  - Risk weights appear too low for insured mortgages and may not be sufficiently through-the-cycle for IRB banks.
  - Regulatory frameworks do not account for important exclusions from mortgage insurance coverage (e.g., lender-facilitated fraud and earthquake damages). Under the Standardized Approach, risk weights are zero; most large banks’ IRB models do not take sufficient account of these exclusions.
  - IRB residential mortgage models have features that generate fairly strong procyclical effects; some important inputs to Probability of Default (PD) correlate positively with the economic cycle. Authorities should review and adapt model approval frameworks to limit variability of risk weights through the economic cycle.
- Forbearance and restructuring:
  - Adopt a common forbearance definition and monitoring framework for credit risk across all jurisdictions in Canada, aligned with BCBS guidance, to improve risk monitoring given the importance of debt restructuring for managing problem real estate exposures.
- Asset pledging:
  - OSFI’s guideline on asset pledging should ensure sufficient unencumbered assets to support the claim of depositors.

### Institutional setting: federal agencies and provincial regulators
- Federal agencies with mandates related to DTIs include:
  - The Minister of Finance.
  - Bank of Canada (BOC): monetary policy, currency, financial system stability, provision of liquidity, oversight of key domestic payments, clearing and settlement systems.
  - Office of the Superintendent of Financial Institutions (OSFI): supervises and regulates all banks and federally regulated insurers, trust and loan companies, cooperative credit associations, fraternal benefit societies, and private pension plans subject to federal oversight; also reviews safety and soundness of Canada Mortgage and Housing Corporation’s (CMHC) commercial activities.
  - Canada Deposit Insurance Corporation (CDIC): federal deposit insurer and resolution authority for federally regulated DTIs and certain provincially regulated entities.
  - Financial Consumer Agency of Canada (FCAC): protects financial customers and strengthens financial literacy.
  - Financial Transactions and Reports Analysis Centre of Canada (FINTRAC): financial intelligence unit; supervises reporting entities for AML/CFT obligations.
- Provincial regulators and roles:
  - British Columbia: FICOM responsible for prudential and conduct supervision of credit unions, insurance companies and trusts of provincially regulated financial entities; administrator of Credit Union Deposit Insurance Corporation (CUDIC).
  - Québec: AMF is a fully integrated regulatory authority responsible for prudential and conduct supervision and administers the provincial deposit insurance scheme guaranteed by the Government of Québec.

### Deposit-taking institutions (DTIs): market structure and key statistics
- Consolidated DTI assets totaled about Can$6,012 billion, representing 364 percent of GDP at end-2017.
- Federally regulated banks, trusts and loan companies accounted for 92 percent of total DTI sector assets; provincially regulated credit unions accounted for 8 percent.
- Credit union deposits/savings as of end-2017:
  - Total credit unions held Can$308 billion in deposits/savings.
  - Can$120 billion held by caisses populaires in Québec.
  - Can$66 billion held by credit unions in British Columbia.
  - Can$44 billion held by credit unions in Ontario.
- Trust and loan companies: 43 trust companies and 18 loan companies federally licensed; stand-alone and foreign owned trust and loan companies represent less than 1 percent of total DTI sector assets.
- Concentration:
  - The DTI sector is highly concentrated: the top 6 banks plus Desjardins account for 84.7 percent of total DTI sector assets.
  - Desjardins Group accounts for approximately 4.6 percent of total DTI sector assets.
- Selected time series (Total DTI Assets, In billion Canadian Dollars; As a percentage of total):
  - Total DTI Assets 1/: 2013 4444, 2014 4873, 2015 5487, 2016 5723, 2017 6012.
  - o/w federally regulated DTI assets 2/: 2013 4,066; 2014 4,467; 2015 5,051; 2016 5,265; 2017 5,524.
  - o/w the top 6 banks: 2013 3,727; 2014 4,111; 2015 4,657; 2016 4,853; 2017 5,097.
  - o/w provincially regulated DTI Assets: 2013 377.8; 2014 405.5; 2015 436.6; 2016 457.2; 2017 487.5.
  - o/w Desjardins Group: 2013 212; 2014 229.4; 2015 248.1; 2016 258.4; 2017 275.1.

### Federal supervision (OSFI): approach, powers, and gaps
- Supervisory approach:
  - OSFI’s supervision is effective, risk-based, conservative, consolidated and cross-border focused, forward-looking, and includes regular in-depth onsite visits.
  - Close collaboration with foreign supervisors and routine engagement with boards and senior management.
- Resourcing and communication:
  - Experienced supervisors in close communication with supervised entities; OSFI expects to be informed by bank management whenever issues arise — an informal approach that may be vulnerable under system stress.
- Reporting and notification limitations:
  - Limited formal reporting with regard to related-party transactions and large exposures. Regulatory reporting is largely consolidated; obtaining detailed underlying information can limit cross-industry analysis.
- Statutory framework and independence:
  - OSFI lacks authority to issue legally enforceable regulations and de jure independence is not embedded; BA provides the Minister of Finance authority to override OSFI prudential judgment in some areas.
  - Recommendation: codify the “prudential veto” in the Bank Act so OSFI’s independence is embedded in statute and transactions rejected by OSFI cannot be overridden by the Minister except under extraordinary circumstances and with full public disclosure.

### Recommendations on regulation and supervision of DTIs (selected, from Table 1)
- Institutional arrangements, coordination and cooperation:
  - Remove barriers and improve coordination between federal and provincial supervisors and other relevant agencies. (OSFI, AMF, other provincial regulators) — Priority: H; Timeframe: I. ¶82
  - Embed OSFI’s independence by codifying the “prudential veto” in the Bank Act. (OSFI, MoF) — Priority: H; Timeframe: NT. ¶28, Annex 1
  - Modernize institutional arrangements, granting FICOM autonomy and operational independence and ability to implement Basel III. (BC MoF) — Priority: H; Timeframe: I. ¶72, 73
  - Remove legislative prohibitions for FICOM to share information with the BOC. (BC MoF) — Priority: H; Timeframe: I. ¶82
- Capital, credit risk and provisioning:
  - Disallow the PD substitution method by IRB banks for insured residential retail. (OSFI) — Priority: H; Timeframe: NT. ¶40
  - Revise IRB model approval frameworks for residential mortgages to reduce point-in-time inputs. (OSFI, AMF) — Priority: H; Timeframe: NT. ¶41
  - Revise the zero credit risk weight used under the Standardized Approach for insured residential real estate exposures. (OSFI, AMF, FICOM) — Priority: M; Timeframe: NT. ¶39, 75, 78
  - Assess whether IFRS9 Expected Credit Losses (ECL) are adequate from a prudential perspective (e.g., stress-testing under Pillar 2). (OSFI, AMF, FICOM) — Priority: M; Timeframe: NT. ¶38
  - Enhance monitoring and supervision of forbearance by introducing a standardized definition, aligned with BCBS guidance, and prudential reporting. (OSFI, AMF, FICOM) — Priority: M; Timeframe: NT. ¶37
- Liquidity risk:
  - Assess adequacy of LCR inflow assumptions (50 percent roll-over rate) and NCCF framework given mortgage amortization and renewal risk. (OSFI, AMF, FICOM) — Priority: H; Timeframe: I. ¶46
  - Establish LCR requirements for the main Canadian entities and Canadian-dollar liquidity monitoring tools. (OSFI) — Priority: M; Timeframe: NT. ¶45
  - Review and enhance the regulatory framework for Central One. (FICOM) — Priority: M; Timeframe: NT. ¶76
- Regulatory framework and reporting:
  - Review and update the large exposure guideline in line with BCBS standards and introduce a large exposure prudential report. (OSFI) — Priority: M; Timeframe: NT. ¶26, Annex 1; (AMF) — Priority: M; Timeframe: NT. ¶67
  - Enhance pledging guideline by including prior notification or approval requirement for secured borrowing when a threshold is reached. (OSFI) — Priority: M; Timeframe: NT. ¶43
  - Introduce a formal process for vetting and approving new Board members. (OSFI) — Priority: M; Timeframe: NT. ¶49, Annex 1
  - Improve the significant interest and related party definition in the Bank Act and consider requiring more regular prudential reporting of related-party exposures. (OSFI) — Priority: L; Timeframe: NT. ¶26, Annex 1
- Supervisory framework:
  - Review whether the current supervisory approach gives sufficient weight to AML/CFT non-compliance observations in the absence of power to impose administrative penalties. (OSFI) — Priority: M; Timeframe: NT. ¶52

### Basel compliance, capital, and IRB observations
- Basel compliance and capital framework:
  - Canada displayed a high level of compliance with Basel standards in the 2014 RCAP; OSFI has continued to implement Basel III.
  - One nuance: preference shares are eligible as Additional Tier 1 capital in Canada despite lacking a going-concern principal loss absorption feature.
- RWA floor for IRB banks:
  - OSFI implemented an RWA floor for IRB banks at 72.5 percent of standardized RWAs; previous floor of 90 percent of Basel I RWAs replaced. OSFI planned to increase this to 75 percent in 2019. No bank is currently impacted by the floor.
- Capital buffers and ICAAP:
  - OSFI applies a conservation buffer of 2.5 percent to all banks and an additional 2.5 percent for all D-SIBs (1 percent D-SIB buffer and 1.5 percent Pillar 2 Domestic Stability Buffer), all on a consolidated basis.
  - Countercyclical capital buffer has not been activated; the DSB acts as a kind of countercyclical buffer but only applies to D-SIBs.
- IRB models and procyclicality:
  - IRB banks’ residential mortgage PD estimation models appear point-in-time and can generate procyclical effects through inputs like Beacon score and recent default rates; OSFI and AMF should review model approval frameworks and consider using stressed data or PD floors.

### Liquidity, LCR treatment of mortgages, and solo liquidity
- LCR and NCCF considerations:
  - LCR implemented with a minimum requirement of 100 percent since January 2015; inflows currently permit recording mortgage maturity as a cash inflow in line with contract, despite five-year contractual terms and 25–30 year amortization.
  - Retention ratios: around 90 percent at banks and credit unions; around 50 percent at Alt-A lenders (in benign market circumstances).
  - NCCF reporting and limits exclude all cash inflows from maturing mortgage principal.
  - Recommendation: review LCR inflow assumptions (50 percent roll-over) and establish minimum liquidity requirements for main solo banking entities and Canadian-dollar liquidity monitoring for main Canadian entities.
- Covered bonds and pledging:
  - OSFI guideline sets a limit of four per cent (4 percent) of total assets for covered bonds; DTIs must notify Superintendent if breached.
  - Recommendation: review pledging guideline by adding prior notification or approval requirement for secured (wholesale) borrowing to assure DTIs retain sufficient uncollateralized assets to support depositors’ claims.

### Provincial supervision: AMF (Québec) and FICOM (British Columbia)
- AMF (Québec):
  - Operationally independent and self-funded; increased staff in Solvency Department from 95 to 102 and in deposit-taking directorate from 20 to 24.
  - Desjardins Group balance sheet about Can$ 275 billion (as of end-2017); Desjardins common equity tier 1 ratio around 17.5 percent versus required 8.0 percent (including buffers).
  - AMF implemented Basel III, ICAAP, and introduced a Residential Hypothecary Guideline equivalent to OSFI B-20.
- FICOM (British Columbia):
  - Oversees 42 credit unions with total assets of over Can$77 billion (shortly after assessment one large credit union became federally regulated reducing count to 41; as of December 2018 total assets of the 41 amount to USD 63.5 billion).
  - Lacks operational independence, situated within BC Ministry of Finance; unable to introduce formal Basel III capital and liquidity requirements.
  - Structural resource shortfall: 28 vacancies on about 111 positions as of March 2018; average time between completion of an onsite review and communication of findings to regulated entity has been six months.
  - Regulatory issues: CMHC insured mortgages accorded zero risk weight despite exclusions (e.g., earthquake coverage), and credit union exposures to Central One (C1) are zero risk-weighted despite C1 being a private organization with no government guarantee; no clear procedure for allocating C1’s liquidity across credit unions in stress.

### Cooperation and coordination: federal–provincial mechanisms and gaps
- Federal-level cooperation structures:
  - Financial Institutions Supervisory Committee (FISC): facilitates consultation and exchange among OSFI, CDIC, BOC, FCAC, Department of Finance; chaired by the Superintendent; meets at least quarterly.
  - Senior Advisory Committee (SAC): chaired by Deputy Minister of Finance; forum for financial sector policy issues.
  - CDIC Board of Directors: includes Deputy Minister of Finance, Governor of the BOC, Superintendent of Financial Institutions, and others; some CDIC tools require Minister or Governor-in-Council approval.
  - Heads of Agencies (HoA) Committee: chaired by Governor of BOC; includes Department of Finance, OSFI, and four provincial Securities Regulators.
- Provincial cooperation:
  - Credit Union’s Prudential Supervisors Association (CUPSA) promotes effective regulation and supervision of credit unions; MoU in process to formalize information exchange.
- Federal–provincial coordination gaps:
  - Informal staff collaboration not consistent; policy inconsistencies create risk of regulatory arbitrage (e.g., four provinces provide unlimited deposit insurance for their credit unions while federally-regulated DTIs have a limit).
  - OSFI did not share prudential data with AMF, limiting AMF’s ability to compare Desjardins with D-SIBs.
  - FICOM is unable to share prudential data with authorities such as the BOC.
  - Recommendation: remove barriers preventing close cooperation and adopt a more formalized framework for cooperation and information sharing.

### Household and housing market observations
- Household financial soundness highlights:
  - Increase in household debt significant and concurrent with increase in household wealth.
  - Debt-servicing to income stable though interest payments at historically low levels.
  - Canadian households among the most indebted; household borrowing largely driven by mortgage loans.
  - Debt of financially weak households (debt servicing-to-income above 40 percent) has gained a larger share over the past decade.
  - British Columbia and Ontario face heightened financial stability risks given larger household debt-at-risk and downside risk to house prices.
- Housing market developments:
  - Imbalances driven by over-valued house prices and household financial weaknesses; house prices more stabilized in recent two years.
  - Immigrations an important driver of rising housing prices in some regions.
  - Construction boom evident in British Columbia; Alberta experienced a boom-bust cycle driven by oil prices.
  - Slowdown in residential mortgage lending largely led by decline in insured mortgages.
  - House price to income relatively high and has increased significantly since 2012.

### Cybersecurity, operational risk, and conduct
- National cyber strategy and Cyber Centre:
  - Budget 2018 announced creation of the Canadian Centre for Cyber Security (Cyber Centre) to coordinate execution of the cyber strategy; will consolidate work of the Canadian Cyber Incident Response Centre and be housed within the Communications Security Establishment.
  - Banking sector has informal incident-sharing arrangements; no formal “Sheltered Harbor” approach in place.
- OSFI cyber supervision:
  - Supervision of cyber risk and banking system resilience high on OSFI’s agenda; introduced in 2017 requirements for major incidents reporting.
  - 2017/18 cross-sectoral cyber security review at 12 institutions using a scenario approach; operational/technology risk team monitors D-SIBs and selected SMSBs.
  - OSFI issued revised Operational Risk Management Guideline in June 2016 and maintains outsourcing guidance (2001, revised 2009); cross-sector review of third-party risk management foreseen.
- Conduct and consumer protection:
  - FCAC supervises compliance with consumer protection measures; about 125 staff with 27 in supervision covering 376 FRFIs; implementing a new risk-based supervisory framework (Tier 1 and Tier 2).
  - Proposals announced November 2018 to expand FCAC’s role and resources.
  - FCAC and OSFI conducted concurrent assessments (e.g., banks’ retail sales practices in 2017).

### BCP follow-up and supervisory toolkit updates (selected)
- Progress on BCP recommendations since 2014 includes guideline updates and new supervisory tools; examples:
  - B-20 Residential Mortgage Underwriting Practices and Procedures updated October 2017 (prescribed stress test).
  - IFRS 9 implemented January 1, 2018; IFRS 9 concerns: lifetime losses in stage 2 and 3 calculated based on contractual maturity which may understate renewal risk.
  - OSFI implemented Liquidity Adequacy Requirements and NCCF (NCCF is supervisory tool with private targets).
  - OSFI introduced a leverage ratio guideline with minimum requirement of 3 percent and is updating it in line with finalized Basel III standard.
  - OSFI introduced Total Loss Absorbing Capacity (TLAC) framework and disclosure requirements in 2018.
  - AMF enacted Bill 141 on June 13, 2018 with expanded supervisory powers and administrative penalties.

### Data disclosure governance and regulatory developments
- OSFI data disclosure:
  - OSFI discloses current and historical data where external stakeholders can select filing dates and build time series one at a time; authorized data published on OSFI website.
- Main regulatory developments since 2014:
  - BA and TLCA amended multiple times (2014, 2015, 2016, June 21, 2018) to update regulation-making powers, protect supervisory information, facilitate continuance of credit societies, allow designation of D-SIBs, and modernize provisions related to financial technology and information processing (some amendments not yet in force).
  - Department of Finance consulted on legislative proposals to modernize corporate governance provisions in 2017–18; legislation anticipated in 2019.
- OSFI guidelines issued or updated since previous assessment (selected):
  - Capital Adequacy Requirements updates (2014–2019), Liquidity Adequacy Requirements (LCR implemented January 2015 with minimum 100 percent), IFRS 9 guidance (2016), Pillar 3 Disclosure Requirements (2017), Corporate Governance Guideline (updated September 2018), E-21 Operational Risk Management (2016), E-22 Margin Requirements (2017), E-23 Model Risk Management (2017).

*Source: International Monetary Fund, CANADA FSAP Technical Note (review reflects regulatory and supervisory frameworks as per November 9, 2018).*

### 2018. It contains technical analysis and detailed

### CANADA

### Executive summary: thematic focus and main findings
- The FSAP conducted a focused review assessing regulatory and supervisory frameworks through the lens of housing market-related risks. The review covered federal jurisdiction and the provinces of British Columbia and Québec. The review followed up on main recommendations of the 2014 Basel Core Principles (BCP) assessment.  
- Seven institutions dominate the DTI sector and account for 84.7 percent of total DTI sector assets.  
- Credit unions in British Columbia: FICOM oversees 42 credit unions with total assets of over Can$ 77 billion as of end-2017.  
- Desjardins Group in Québec: AMF oversees Desjardins Group with assets of Can$275 billion, and a small stand-alone financial services cooperative.  
- OSFI’s supervision of banks remains effective with a high level of compliance with the BCP; approach is conservative, risk-based, forward-looking, and includes consolidated and cross-border supervision and regular on-site inspections of significant overseas operations. OSFI practices “close touch” supervision emphasizing board and management accountability. However, OSFI’s informal expectation that institutions keep it informed may not perform well under system stress.  
- Residual BCP shortfalls (some persisting from 2014) include: OSFI’s lack of de jure independence (BCP 2); an incomplete fit and proper process for new Board appointments (BCP 5); lack of powers over transfer of significant ownership (BCP 6); and limited monitoring of large exposures and related parties (BCPs 19 and 20). The definition of significant interest should be broadened to capture indirect ownership and significant influence.  
- Provincial supervisors: AMF is resourced and maintains high regulatory and supervisory standards, has implemented Basel III and a risk-based approach; FICOM lacks operational independence and sufficient resources and has not been able to introduce formal Basel III requirements. Proposed legislative change for FICOM would help address weaknesses.  
- Federal-provincial coordination works well in many respects but needs enhancement—improvements warranted in policy development (especially between OSFI and AMF), coordination of data collection, and exchange of prudential information. Authorities should explore removing barriers to closer cooperation.  

### Key prudential observations related to housing and mortgages
- Unique Canadian mortgage features (notably five-year contractual periods) are not fully reflected in prudential settings:
  - IFRS9 expected credit losses (ECL) are based on contractual maturity and do not take into account amortization period and possible related renewal risk; a Pillar 2 add-on could be appropriate.  
  - Liquidity Coverage Ratio (LCR) inflows assume a 50 percent roll-over rate and may not be sufficiently prudent given mortgage amortization and renewal risk.  
  - OSFI’s primary focus on consolidated supervision should be complemented by better monitoring of credit and liquidity risks of material licensed entities.  
- Risk weights on mortgage lending:
  - Risk weights appear too low for insured mortgages and may not be sufficiently through-the-cycle for IRB banks.  
  - Regulatory frameworks do not account for important exclusions from mortgage insurance coverage (e.g., lender-facilitated fraud and earthquake damages). Under the Standardized Approach, risk weights are zero; most large banks’ IRB models do not take sufficient account of these exclusions.  
  - IRB residential mortgage models have features that generate fairly strong procyclical effects; some important inputs to Probability of Default (PD) correlate positively with the economic cycle. Authorities should review and adapt model approval frameworks to limit variability of risk weights through the economic cycle.  
- Forbearance and restructuring:
  - A common forbearance definition and monitoring framework for credit risk across all jurisdictions in Canada should be adopted, aligned with BCBS guidance, to improve risk monitoring given the importance of debt restructuring for managing problem real estate exposures.  
- Asset pledging:
  - OSFI’s guideline on asset pledging should ensure sufficient unencumbered assets to support the claim of depositors.  

### Institutional setting: federal agencies and roles
- Federal agencies with mandates related to DTIs include:
  - The Minister of Finance: overarching authority over federal financial sector legislation.  
  - Bank of Canada (BOC): responsibilities include monetary policy, currency, financial system stability, provision of liquidity, and oversight of key domestic payments, clearing and settlement systems.  
  - Office of the Superintendent of Financial Institutions (OSFI): supervises and regulates all banks and federally regulated insurers, trust and loan companies, cooperative credit associations, fraternal benefit societies, and private pension plans subject to federal oversight; also reviews safety and soundness of Canada Mortgage and Housing Corporation’s (CMHC) commercial activities.  
  - Canada Deposit Insurance Corporation (CDIC): federal deposit insurer and resolution authority for federally regulated DTIs and certain provincially regulated entities.  
  - Financial Consumer Agency of Canada (FCAC): protects financial customers by overseeing federally regulated financial entities and strengthening financial literacy.  
  - Financial Transactions and Reports Analysis Centre of Canada (FINTRAC): Canada’s financial intelligence unit; supervises reporting entities for AML/CFT obligations.  

### Supervision: federal and provincial observations
- OSFI:
  - Supervisory approach is well-structured, adaptive, and forward-looking with emphasis on board and management accountability and consolidated supervision.  
  - Close collaboration with foreign supervisors and regular on-site inspections of significant overseas operations.  
  - Areas for improvement: embed OSFI’s independence (prudential veto) in statute (Bank Act); formalize fit and proper process for Board appointments; enhance powers/monitoring over transfers of significant ownership and related-party exposures.  
- AMF (Québec):
  - Resourced for its role, has implemented Basel III, risk-based supervision, adheres to international standards, and has harmonized approach aligned with federal regime. Challenge: dominance of Desjardins limits benchmarking ability.  
- FICOM (British Columbia):
  - Lacks operational independence and sufficient resources; supervisory practices are sound but unable to introduce formal Basel III requirements. Proposed legislative changes would grant autonomy and operational independence and ability to implement Basel III and other reforms. Legislative prohibition currently prevents FICOM from sharing information with the BOC; removing this prohibition is recommended.  

### Recommendations on regulation and supervision of DTIs (excerpt from Table 1)
- Institutional arrangements, coordination and cooperation:
  - Remove remaining barriers and improve coordination and cooperation between federal and provincial supervisors and other relevant agencies. (OSFI, AMF, other provincial regulators) — Priority: H; Timeframe: I. ¶82  
  - Embed OSFI’s independence by codifying the “prudential veto” in the Bank Act (BA) so the framework is robust to changes in personnel and culture. (OSFI, MoF) — Priority: H; Timeframe: NT. ¶28, Annex 1  
  - Modernize institutional arrangements, granting FICOM autonomy and operational independence and the ability to move forward on the implementation of the Basel III framework and other relevant regulatory reforms. (BC MoF) — Priority: H; Timeframe: I. ¶72, 73  
  - Remove legislative prohibitions for FICOM to share information with the BOC. (BC MoF) — Priority: H; Timeframe: I. ¶82  
- Capital, credit risk and provisioning:
  - Disallow the PD substitution method by IRB banks for insured residential retail as the insurance contracts are not unconditional. (OSFI) — Priority: H; Timeframe: NT. ¶40  
  - Revise IRB model approval frameworks for residential mortgages to reduce the impact of point-in-time inputs, so that risk weights vary as little as possible with the economic cycle. (OSFI, AMF) — Priority: H; Timeframe: NT. ¶41  
  - Revise the zero credit risk weight used under the Standardized Approach for insured residential real estate exposures, given that these contracts are not unconditional (i.e. they contain exclusions). (OSFI, AMF, FICOM) — Priority: M; Timeframe: NT. ¶39, 75, 78  
  - Assess whether IFRS9 Expected Credit Losses (ECL) are adequate from a prudential perspective (e.g., using stress-testing under Pillar 2) as IFRS ECL are based on contractual maturity and do not take into account amortization maturity and renewal risk. (OSFI, AMF, FICOM) — Priority: M; Timeframe: NT. ¶38  
  - Enhance monitoring and supervision of forbearance by introducing a standardized definition, aligned with BCBS guidance, and prudential reporting. (OSFI, AMF, FICOM) — Priority: M; Timeframe: NT. ¶37  
- Liquidity risk:
  - Assess whether the inflows in the LCR (assuming a 50 percent roll-over rate) and Net Cumulative Cash Flow (NCCF) framework are prudent considering the nature of banks’ residential mortgage portfolio and the difference between contractual and amortization maturity. (OSFI, AMF, FICOM) — Priority: H; Timeframe: I. ¶46  
  - Establish LCR requirements for the main Canadian entities as well as Canadian-dollar liquidity monitoring tools. (OSFI) — Priority: M; Timeframe: NT. ¶45  
  - Review and enhance the regulatory framework for Central One. (FICOM) — Priority: M; Timeframe: NT. ¶76  
- Regulatory framework and reporting:
  - Review and update the large exposure guideline in line with BCBS standards and introduce a large exposure prudential report. (OSFI) — Priority: M; Timeframe: NT. ¶26, Annex 1; (AMF) — Priority: M; Timeframe: NT. ¶67  
  - Continue to monitor and engage with the industry on implementation of the revised Corporate Governance Guideline. (AMF) — Priority: M; Timeframe: NT. ¶68  
  - Enhance pledging guideline by including prior notification or approval requirement for secured borrowing when a threshold is reached, assuring DTIs retain sufficient uncollateralized assets to support depositors’ claims. (OSFI) — Priority: M; Timeframe: NT. ¶43  
  - Introduce a formal process for vetting and approving new Board members. (OSFI) — Priority: M; Timeframe: NT. ¶49, Annex 1  
  - Improve the significant interest and related party definition in the Bank Act and consider requiring more regular prudential reporting of related-party exposures. (OSFI) — Priority: L; Timeframe: NT. ¶26, Annex 1  
- Supervisory framework:
  - Review whether the current supervisory approach gives sufficient weight to AML/CFT non-compliance observations in the absence of the power to impose administrative penalties. (OSFI) — Priority: M; Timeframe: NT. ¶52

*Source: International Monetary Fund, CANADA FSAP Technical Note (review reflects regulatory and supervisory frameworks as per November 9, 2018).*

### 8. On a provincial level the institutional settings and regulatory frameworks vary. In

### 1canea2020005 - 8. On a provincial level the institutional settings and regulatory frameworks vary. In

### Institutional settings and provincial regulators
- British Columbia:
  - FICOM is responsible for prudential and conduct supervision of credit unions, insurance companies and trusts of provincially regulated financial entities (FEs).
  - British Columbia Securities Commission (BCSC) is responsible for securities market surveillance and conduct.
  - FICOM is the administrator of the provincial Credit Union Deposit Insurance Corporation (CUDIC), a statutory corporation, funded by the industry.
- Québec:
  - AMF is a fully integrated regulatory authority (responsible for prudential as well as conduct supervision, with a focus on: client services and compensation, DTIs and insurance companies, distribution of financial products and services as well as securities).
  - AMF is also responsible for the administration of the provincial deposit insurance scheme, which is guaranteed by the Government of Québec.

### Interagency cooperation mechanisms (federal and provincial)
- Federal-level committees and roles:
  - Financial Institutions Supervisory Committee (FISC):
    - Established in 1987; mandated in the Office of the Superintendent of Financial Institutions Act.
    - Facilitates consultation and exchange of information on supervision of financial institutions between OSFI, CDIC, the BOC, FCAC, and the Department of Finance.
    - Every member is entitled to any information relating directly to supervision that is in the possession or control of any other member.
    - Chaired by the Superintendent of Financial Institutions.
    - Meets at least quarterly, and more often as needed.
    - Responsible for coordination and communication amongst federal agencies with respect to strategies and action plans for addressing problem financial institutions and other emerging issues, and ensuring effective coordination of responses to events and requests.
  - Senior Advisory Committee (SAC):
    - Chaired by the Deputy Minister of Finance with participation from the same regulatory agencies as FISC.
    - Acts as a discussion forum for financial sector policy issues, including financial stability and systemic vulnerabilities.
    - Exchanges views among financial sector agencies to inform advice to the Minister of Finance on legislative, regulatory, and policy issues; other government agencies may be invited when appropriate (e.g., CMHC).
  - CDIC Board of Directors:
    - Composition and responsibilities set out in the CDIC Act.
    - Governs the organization and makes decisions and/or recommendations on use of resolution tools for federally-regulated member institutions.
    - Board comprises the Deputy Minister of Finance, the Governor of the BOC, the Superintendent of Financial Institutions, a Deputy Superintendent of Financial Institutions, the Commissioner of the Financial Consumer Agency, and six others drawn from the Canadian private sector, including the Chair.
    - Use of some CDIC resolution tools requires approval of the Minister of Finance and/or the Governor-in-Council (Cabinet).
  - Heads of Agencies (HoA) Committee:
    - Chaired by the Governor of the BOC.
    - Includes the Department of Finance, OSFI, and four provincial Securities Regulators (Ontario Securities Commission, AMF, Alberta Securities Commission, and BCSC).
    - Allows federal and provincial securities market regulators to exchange information and coordinate on issues of mutual concern (e.g., hedge funds and over-the-counter derivatives).
- Supporting structures:
  - Separate working-level sub-committees support the bodies above as further collaboration layers between agencies.
- Provincial cooperation:
  - Credit Union’s Prudential Supervisors Association (CUPSA):
    - Exists to promote effective regulation and supervision of Canadian credit unions.
    - Forum for exchange of policy and supervisory framework developments and other prudential issues.
    - A Memorandum of Understanding (MoU) is in the process of being finalized to formalize information exchange on this platform.

### Deposit-taking institutions (DTIs): types, licensing, and limits
- Types of DTIs distinguished: banks, trust companies, loan/savings companies and credit unions (caisses populaires in Québec).
- Bank Act (BA) classification:
  - Banks can only be licensed at the Federal level.
  - BA distinguishes:
    - licensed Canadian banks (Schedule I),
    - foreign bank subsidiaries (Schedule II),
    - foreign bank branches (Schedule III).
  - Foreign bank branches (FBBs):
    - Same powers and subject to same restrictions as banks, except cannot take a material amount of retail deposits (i.e., deposits of less than Can$ 150,000).
    - A “full-service” foreign bank branch may accept deposits in Canada of Can$ 150,000 or greater (section 545).
    - A “lending” foreign bank branch is generally prohibited from accepting deposits.
  - Banks may not carry out certain activities reserved for other federally regulated financial institutions (FRFIs) (e.g., trustee activities are exclusive to trust companies).
- Trust and Loan Companies Act (TLCA):
  - Permitted activities of federal trust and loan companies are similar to banks but with differences:
    - Trust companies are the only DTIs able to act as a trustee in Canada.
    - Trust and loan companies are subject to a limit on their commercial lending.
    - Loan companies are precluded from engaging in trust (fiduciary) activities.
  - Commercial lending limit established in the TLCA is 5 percent of total assets.
    - For companies with a regulatory capital of Can$25 million or more the Superintendent may approve a higher limit.
  - Federal prudentially regulated trust and loan companies also need to be licensed by the provincial regulatory authority responsible for conduct supervision where they operate, creating a dual regulatory and supervisory framework.
- Provincial variation in regulation of trust/loan companies:
  - Ontario: all loan and trust corporations must be federally incorporated to register to conduct business; Financial Services Commission registers federally incorporated loan and trust corporations wishing to conduct business in Ontario.
  - British Columbia: allows incorporation of provincial trust companies (not authorized to take deposits) for which FICOM acts as primary regulator; federally or other provinces licensed trust companies can get permission to operate in British Columbia with FICOM as secondary (conduct) regulator.
  - Québec: similar to British Columbia but also allows provincial incorporation of savings companies (provincial equivalent of federally regulated loan companies).
  - Provincially incorporated deposit-taking trust and loan/savings companies appear to be immaterial as a percentage of total DTI system assets.
- Credit unions:
  - Can be licensed provincially as well as federally.
  - 2014 BA amendment facilitated entry of provincially regulated credit unions into the federal regime.
  - Federally regulated credit unions are allowed to perform the same activities as banks.
  - At the time of the review only one credit union had used the opportunity to become federally regulated.
    - Footnote: Shortly after the assessment, a second credit union received a federal license.
  - All other credit unions are regulated at the provincial level.
  - Licensing of extraterritorial provincial credit unions appears to occur to a limited extent.

### Market structure and key statistics
- Consolidated DTI assets (including foreign subsidiaries) and system metrics:
  - Consolidated DTI assets totaled about Can$6,012 billion, representing 364 percent of GDP at end-2017.
  - Federally regulated banks, trusts and loan companies accounted for the majority (92 percent) of total DTI sector assets.
  - Provincially regulated credit unions (254 credit unions and 271 caisses populaires) accounted for the remaining 8 percent.
  - More than a third of Canada’s population is a member of at least one credit union.
- Credit union deposits/savings as of end-2017:
  - Total credit unions held Can$308 billion in deposits/savings.
  - Can$120 billion held by caisses populaires in Québec.
  - Can$66 billion held by credit unions in British Columbia.
  - Can$44 billion held by credit unions in Ontario.
- Trust and loan companies:
  - Total federally licensed: 43 trust companies and 18 loan companies.
  - A large proportion are subsidiaries of banks and insurance companies.
  - Stand-alone and foreign owned trust and loan companies represent less than 1 percent of total DTI sector assets.
- Concentration:
  - The DTI sector is highly concentrated: the top 6 banks plus Desjardins account for 84.7 percent of total DTI sector assets.
  - In March 2013, OSFI designated six of the federally regulated banks as D-SIBs.
  - Desjardins Group designated in 2013 as a D-SIFI by AMF; Desjardins Group (including insurance activities) accounts for approximately 4.6 percent of total DTI sector assets.
- Table 2. Canada: DTI Assets Overview (In billion Canadian Dollars; As a percentage of total)
  - Total DTI Assets 1/: 2013 4444, 2014 4873, 2015 5487, 2016 5723, 2017 6012; 2013 100%, 2014 100%, 2015 100%, 2016 100%, 2017 100%
  - o/w federally regulated DTI assets 2/: 2013 4,066; 2014 4,467; 2015 5,051; 2016 5,265; 2017 5,524; 2013 91.5%, 2014 91.7%, 2015 92.0%, 2016 92.0%, 2017 91.9%
  - o/w the top 6 banks: 2013 3,727; 2014 4,111; 2015 4,657; 2016 4,853; 2017 5,097; 2013 83.9%, 2014 84.4%, 2015 84.9%, 2016 84.8%, 2017 84.8%
  - o/w provincially regulated DTI Assets: 2013 377.8; 2014 405.5; 2015 436.6; 2016 457.2; 2017 487.5; 2013 8.5%, 2014 8.3%, 2015 8.0%, 2016 8.0%, 2017 8.1%
  - o/w Desjardins Group: 2013 212; 2014 229.4; 2015 248.1; 2016 258.4; 2017 275.1; 2013 4.8%, 2014 4.7%, 2015 4.5%, 2016 4.5%, 2017 4.6%
  - Sources: OSFI, Canadian Credit Union Association, and IMF staff estimates.
  - Notes:
    - 1/ consolidated (worldwide) assets of Canadian licensed entities
    - 2/ including one federally regulated credit union as of end 2016
    - Footnote: This does not include any deposits or assets held by the Desjardins Federation.
- International standing:
  - Five of the 6 D-SIBs are among the top 75 banks as determined by the Basel III leverage ratio exposure measure and part of the BCBS sample used for the G-SIB assessment.
  - Financial Stability Board identified the Royal Bank of Canada as a G-SIB in November 2017.
- Geographic exposures:
  - Top Canadian D-SIBs have large international operations concentrated primarily in the United States.
  - The second largest bank behind Royal Bank of Canada is among the top ten banks in the United States and its U.S. retail revenue accounts for almost 30 percent of its total revenue.
  - One of the D-SIBs has significant operations in Latin America and Asia Pacific.
- Asset quality and business lines:
  - Canada’s banking system is well capitalized and profitable with low Non-Performing Loans (NPLs).
  - D-SIBs’ business lines mainly: retail, commercial banking and wealth management; to a lesser extent proprietary trading activities.
  - D-SIB residential and commercial real estate exposure totaled about Can$1.5 trillion and Can$235 billion, respectively, accounting for approximately 29.4 and 4.6 percent of D-SIB total assets as of end-2017.
  - Residential retail portfolios (overwhelmingly Canadian and United States) are the largest exposure class of the D-SIBs.

### Deposit-taking institution supervision — Federal (OSFI)
- Supervisory approach:
  - The 2014 assessment’s conclusion that OSFI’s supervision is effective and of a high standard remains valid.
  - OSFI takes a risk-based and conservative approach reflecting the nature, size, complexity and risk profile of institutions.
  - When an institution has a material weakness, it is subject to increased and more intense supervision.
  - OSFI engages regularly with boards of directors, key management personnel, and bank staff.
  - OSFI conducts in-depth onsite visits using a mix of specialist staff and supervisors with detailed institutional knowledge.
  - Supervisory approach is well structured, founded in consolidated and cross-border supervision, forward looking and adaptive.
- Supervisory resourcing and communication:
  - OSFI has experienced supervisors in close communication with supervised entities.
  - Communication between OSFI senior staff and banks is frequent and open at all levels.
  - OSFI expects to be informed by bank management whenever issues arise.
  - The informal approach to information flows is vulnerable to staff turnover at banks and OSFI and may not work as well under system stress.
- Reporting and notification limitations:
  - Several areas where reporting and notification obligations could be more formal or frequent.
  - Currently limited formal reporting with regard to related-party transactions and large exposures (see Annex 1).
  - Regulatory reporting is largely based on consolidated positions; supervisors must obtain detailed underlying information from institutions, which can limit ability to analyse aggregate figures across the industry due to format and definition variation bank by bank.
- Statutory framework and independence:
  - The statutory framework provides comprehensive powers and operational flexibility; has been interpreted to grant OSFI de-facto independence.
  - OSFI lacks authority to issue legally enforceable regulations but uses guidelines (backed by enforceable instruments) which banks view as equivalent.
  - Framework would be stronger if OSFI’s independence were more explicitly embedded in legislation.
  - The BA provides the Minister of Finance authority to override OSFI prudential judgment in some key areas (creation, change of control, merger or failure of a bank).
  - Recommendation: legislation could be amended so that when OSFI rejects a transaction on prudential grounds, such a decision cannot be overridden by the Minister except under extraordinary circumstances and with full public disclosure.
- Legislative review process:
  - Financial sector legislation includes provisions requiring review and renewal five years from enactment.
  - Unless amended, legislation authorizing banks to conduct business lapses due to a sunset clause.
  - Consultation on prospective changes occurs during the review period.
  - An overview of main legislative changes and new or updated guidelines since the 2014 FSAP is included in Annex 2 (overview indicative of authorities’ efforts to keep the framework up to date and at the forefront of global regulatory reform implementation).

### Supervision of mortgage exposures
- OSFI monitoring and governance:
  - OSFI closely monitors Canadian mortgage exposures.
  - OSFI’s Emerging Risk Committee (ERC), chaired by an Assistant Superintendent, convenes quarterly to review major risks and decide on actions.
  - Residential mortgage risk has featured highly on OSFI’s risk register for some years.
- Policy and supervisory initiatives:
  - OSFI updated B20 guideline sets expectations for DTIs’ residential mortgage underwriting.
    - B20 was updated in October 2017 to include a prescribed stress test for borrowers, resulting in tightening of underwriting standards.
  - OSFI reviewed implementation of B20 via a cross-sector review: self-assessment followed by review of DTIs’ residential underwriting and supporting policies; next phase will focus on effectiveness testing.
  - DTIs clearly pay heed to the B20 guideline and its principles.
  - OSFI undertook a hypothetical portfolio exercise based on data at December 2017 assessing consistency of D-SIBs’ risk weights across a hypothetical portfolio.
    - Recommendation: OSFI should consider fine-tuning and repeating this exercise on a regular basis while housing market vulnerabilities remain high; and explore the variations in RWAs between D-SIBs further.
    - RWA differences may be explained by differences in underlying risk, but dispersion due to differences in practices could produce material differences for similar risks and should be assessed.

*Source: Excerpt from the IMF Canada Financial Sector Assessment (1canea2020005) chapter on provincial frameworks, interagency cooperation, DTI market structure, and supervision.*

### 31. Canada displayed a high level of compliance with Basel standards in the 2014 RCAP.

### 1canea2020005 - 31. Canada displayed a high level of compliance with Basel standards in the 2014 RCAP.

### Basel compliance and capital framework
- Canada displayed a high level of compliance with Basel standards in the 2014 RCAP.
- OSFI has continued to proactively implement changes in international capital standards and to implement Basel III as it developed.
- One compliance nuance: preference shares are eligible as additional tier 1 capital in Canada even though they do not have a going-concern principal loss absorption feature; this has not resulted in a non-compliant rating.
- OSFI has mandated disclosure requirements under Pillar 3.
- OSFI expects D-SIBs to hold capital within the consolidated group consistent with the level and location of risk.

### Risk-weighted assets (RWA) floor for IRB banks
- OSFI implemented a risk-weighted assets (RWA) floor for IRB banks at 72.5 percent of standardized RWAs.
- The previous risk weight floor of 90 percent of Basel I RWAs was replaced with a floor of 72.5 percent of Basel III standardized RWAs.
- OSFI planned to increase this to 75 percent in 2019.
- No bank is currently impacted by the floor.

### Capital buffers and ICAAP
- OSFI has implemented the Basel capital buffers and run a full and systematic review of the Internal Capital Adequacy Assessment Process (ICAAP).
- OSFI applies a conservation buffer of 2.5 percent to all banks and an additional 2.5 percent for all D-SIBs (consisting of a 1 percent D-SIB buffer and a 1.5 percent Pillar 2 Domestic Stability Buffer (DSB)), all on the consolidated basis.
- The countercyclical capital buffer has not been activated; the DSB acts as a kind of countercyclical capital buffer, but only applies to D-SIBs.
- There is no additional buffer for the single Canadian G-SIB.
- OSFI’s ICAAP process is thorough and systematic: banks propose a Pillar 2 add-on informed by a risk appetite statement, capital planning and stress testing; OSFI reviews and compares results across the industry.

### Leverage ratio framework
- OSFI introduced its leverage ratio guideline in 2014 and is in the process of updating it in line with the finalized Basel III standard.
- The guideline specifies a minimum requirement of 3 percent.
- OSFI prescribes institution specific leverage ratio requirements for individual DTIs corresponding with the DTI’s business model and capital target; these are communicated bilaterally and considered supervisory information (not to be disclosed).

### Credit risk regulation and supervision
- OSFI undertakes active, risk-based supervision of credit risk and employs skilled credit risk professionals for significant activity reviews.
- Specialized staff in the Risk Support Sector (RSS) and a pool of credit consultants support credit risk monitoring, supervision, and model validation for the D-SIBs.
- Responsible supervisory teams perform credit risk monitoring and supervision for small and mid-sized banks (SMSBs).

### Forbearance data and definitions
- Collecting consistent information on loan forbearance would further enhance OSFI’s credit risk monitoring and supervision.
- Banks are required to have forbearance policies in practice, but OSFI has not issued guidance on the definition of forborne exposures or regulatory reporting thereof.
- BCBS guidance (April 2017) on prudential treatment and definition of nonperforming exposures and forbearance would make Canadian figures internationally comparable.
- Market participants noted restructuring would be an important tool for managing risks in banks’ mortgage portfolios.

### Provisioning and IFRS 9
- Provisioning requirements are based on IFRS.
- Canada implemented IFRS 9 on January 1, 2018.
- Mortgage amortization schedules are based on longer term horizons (residential mortgages 25–30 years), but mortgage contracts are based on the interest period.
- For prime residential mortgages the market standard contractual period would be 5 years; for Alt-A it is usually a shorter maturity.
- Under IFRS 9 the lifetime losses in stage 2 and 3 are calculated based on the contractual maturity as it assumes renewal is at the discretion of the lender; in a downturn this assumption may not hold.
- It would be advisable to consider implications from a prudential perspective in stress-testing exercises under Pillar 2.

### Insured mortgage residual risks and risk weights
- Credit risk weights for insured residential real estate exposures do not fully capture residual risks; banks should be required to hold capital to cover the risk of non-payment of mortgage insurance.
- None of the three regulators covered in the review (OSFI, FICOM and AMF) require Standardized Approach risk weights that adequately capture these residual risks.
- All three regulators accord a zero risk weight to mortgages insured by or securitizations guaranteed by the Canada Mortgage Housing Corporation (CMHC) because it is seen as sovereign risk.
- Important exclusions from CMHC cover (and private mortgage insurers) include lender-facilitated fraud and damage from certain natural hazards, including earthquakes; limitations exist on CMHC coverage of recovery costs and the time value of money.
- These exclusions and resulting residual risk are not captured in Standardized Approach risk weights.

### IRB treatment of insured mortgages and LGD/PD modeling
- OSFI appears to allow banks to apply the guarantor/PD substitution method for modelling the PD of insured mortgages, modeling PDs on the default risk of the CMHC (considered equivalent to Canadian sovereign risk).
- Banks appear to make no adjustment for the exclusions in guarantor coverage.
- PD substitution would only be appropriate if the guarantor’s payment is unconditional, which given exclusions is not the case.
- The effect of insurance could still be considered in LGD; OSFI should assure potential losses from exclusions are properly reflected in LGD.

### IRB models, point-in-time bias, and procyclicality
- IRB banks’ residential mortgage PD estimation models appear to exhibit point-in-time rather than through-the-cycle characteristics.
- Models have features that can generate procyclical effects in a downturn: inputs like Beacon score and current default rates correlate positively with the economic cycle; some models add the most recent year’s data annually producing a trend of falling PDs during benign times resulting in PD “erosion”.
- OSFI and AMF should review model approval frameworks to reduce procyclicality, for example by:
  - requiring the use of stressed data to compensate for the lack of recent downturn data, or
  - setting floors on PDs that reflect regulator-set stress parameters,
so that risk weights are structurally less likely to vary with the economic cycle.

### Risk weights on commercial and U.S. residential real estate
- IRB commercial real estate mortgages carried an average risk weight of 54 percent which compares to a minimum 60 percent under Basel III.
- Some Canadian banks’ U.S. mortgage exposures have average risk weights around 30 percent and appear to vary appropriately across portfolios.
- IRB commercial real estate mortgage risk weights are in line with the Basel Standardized Approach, as are risk weights on residential real estate U.S. business.

### Covered bonds, secured borrowing, and pledging guideline
- OSFI’s guideline sets a limit of four per cent (4 percent) of total assets for covered bonds; DTIs must notify the Superintendent if breached and provide a remediation plan unless outside their control.
- OSFI’s pledging guideline (guideline B11) requires prudent internal policies and limits for pledging of assets but does not set a similar or combined limit for other secured borrowing as for covered bonds.
- Recommendation: OSFI should review the guideline by adding a prior notification or approval requirement for secured (wholesale) borrowing to improve assurance and visibility on availability of assets to support retail depositors’ claims.

### Liquidity and market risk oversight
- The 2017 RCAP concluded that OSFI achieved a high level of compliance with Basel liquidity standards; only one RCAP comment asked BCBS to clarify a technical point.
- OSFI and AMF consulted on Net Stable Funding Ratio implementation and have been monitoring it informally on a quarterly basis since 2015.
- OSFI should increase focus on Canadian dollar liquidity and on solo banking entities:
  - OSFI currently sets requirements on a consolidated basis; for regulatory LCR, all currency positions are converted to Canadian dollar and reported on a consolidated basis.
  - Canadian dollar-equivalent positions reported for select currencies include Can$, USD, EUR, GBP, and JPY.
  - Currency-specific LCR figures are monitored, although there are no minimum requirements.
  - OSFI’s alternative liquidity measure, Net Cumulative Cash Flow (NCCF), excludes select USD subsidiaries from consolidated reporting due to ring-fencing concerns; they are monitored separately with stand-alone requirements.
  - Minimum liquidity requirements on a solo level provide protection against trapped liquidity in foreign subsidiaries during crises.
  - OSFI should develop minimum liquidity requirements for the main solo banking entities and Canadian dollar liquidity monitoring for main Canadian entities.

### LCR treatment of Canadian mortgages and liquidity conservatism
- LCR requirements are consistent with Basel III standards, but the contractual nature of most Canadian home loans warrants a more conservative approach.
- Most Canadian mortgages are contractually limited to five years or less, though amortization is over 25 or 30 years; loans are typically renewed at the end of the contractual period.
- Retention ratios: around 90 percent at banks and credit unions; around 50 percent at Alt-A lenders (in benign market circumstances).
- OSFI and AMF permit mortgage maturity to be recorded as a cash inflow for LCR in line with contract; regulators should review this because if loans are not refinanced there will be no cash inflow.
- NCCF reporting and limits exclude all cash inflows from maturing mortgage principal.
- For brokered retail deposits, OSFI applies run-off rates in line with Basel LCR standards; OSFI finalized in 2019 changes to its Liquidity Adequacy Requirements guideline to reflect higher run-off rates depending on deposit characteristics.

### Market risk, IRRBB, and trading exposures
- OSFI monitors D-SIBs’ market and interest rate risk in the banking book (IRRBB); market risk requirements are consistent with Basel 2.5.
- D-SIBs operate under internal models with close engagement from OSFI staff.
- D-SIBs repositioned IRRBB exposure considering central banks’ aim to normalize monetary policy.
- Actual market risk exposures of the D-SIBs are limited and well below 10 percent RWA (varying between 3 and 7 percent).
- Capital market-related activities can account at some banks for up to 25 percent of revenues.
- Trading book positions related to real estate are limited (well below 10 percent of the total trading book).

### Nonfinancial risk organization and analytics
- OSFI is rethinking the organization of its Risk Support Sector (RSS) to give a more explicit position to non-financial risk and to strengthen risk and data analytics (including supervisory technology tools).
- The reset is work in progress; the non-financial risk group is indicated to contain operational risk, technology risk, model risk and governance and culture.
- The reset is indicative of OSFI’s ambition to tailor frontier international best practice to Canadian market conditions.

### Governance, culture, and conduct risk
- OSFI issued its Corporate Governance Guideline in 2013 with a revised version in September 2018.
- OSFI has fit and proper powers in statutes but vetting/approval of all new board members and new senior management executives is an informal process.
- OSFI’s culture assessments to date focused on understanding institutions’ risk culture and how it drives behavior that supports or undermines effective risk management; pilot risk culture reviews have been conducted since 2014 with observations shared with institutions.
- OSFI is considering how culture should feed into assessment of an institution’s risk profile and whether it informs effectiveness ratings of other risk mitigants (Board, Senior Management, Risk Management).
- The governance and culture division would be involved in assessing FRFIs’ conduct risk management frameworks; OSFI and FCAC conducted a concurrent assessment of banks’ retail sales practices in 2017 and found internal guidance and awareness on incorporating conduct risk into risk assessments could be enhanced.

### AML/CFT coordination and supervisory powers
- Following the Mutual Evaluation Report (MER) issued in September 2016, FINTRAC and OSFI enhanced coordination of AML/CFT supervision.
- Since 2013 OSFI and FINTRAC used a concurrent approach; since 2015/16 they piloted joint examinations issuing a joint supervisory letter. The pilot period ends in 2018 and the joint approach is being evaluated.
- OSFI has no powers to impose administrative sanctions for non-compliance with AML/CFT requirements or other requirements.
- The 2014 BCP assessment and the MER recommended changing the BA to provide OSFI the power to impose penalties for non-compliance with OSFI’s guidelines relating to AML/CFT and fitness and probity measures.
- In practice OSFI flags non-compliance to FINTRAC, which holds authority to impose administrative monetary penalties under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and associated regulations.
- There may be an indirect penalty if OSFI assesses non-compliance to be a material deficiency (could result in staging, higher annual supervision fees, and higher CDIC deposit insurance fees).
- Risk: AML/CFT non-compliance observations may not be directly captured in OSFI’s risk-based supervisory framework.
- Recommendation: OSFI should review how it incorporates and weighs AML/CFT non-compliance observations in its supervisory approach.

*Source: 1canea2020005 - 31. Canada displayed a high level of compliance with Basel standards in the 2014 RCAP.*

### 52. The Canadian authorities have issued a national strategy for cyber security. The

### 1canea2020005 - 52. The Canadian authorities have issued a national strategy for cyber security. The

### National cyber security strategy and institutional arrangements
- The Government of Canada announced as part of Budget 2018 the creation of the Canadian Centre for Cyber Security (the Cyber Centre).
- The Cyber Centre will be responsible for the coordination of the execution of the cyber strategy.
- The Cyber Centre will consolidate the work of the Canadian Cyber Incident Response Centre and will be housed within the Communications Security Establishment.
- The banking sector appears to have informal arrangements for sharing of incidents; a more formalized approach like “Sheltered Harbor” (industry-developed in the United States) has not been put in place yet.

### OSFI supervision of cyber and operational risk
- Supervisory priorities:
  - Supervision of cyber risk and increasing resilience of the banking system is high on OSFI’s agenda.
  - OSFI introduced in 2017 requirements for major incidents reporting.
- Supervisory activities and scope:
  - The operational/technology risk team monitors in particular the D-SIBs and selected SMSBs.
  - In 2017/18 OSFI conducted a cross-sectoral cyber security review at 12 institutions using an innovative scenario approach.
  - Cross-sectoral work on cyber risk dates back to 2013: industry cyber self-assessment (2013) and on-site cyber risk management review in 2014.
- Operational risk on-site activity:
  - Over the past 18 months OSFI conducted 18 operational risk-related on-site activities, mainly focused on D-SIBs and large SMSBs.
  - Topics covered include outsourcing, IT governance, operational risk management framework, change management and fraud.
- Supervisory integration:
  - The operational risk division leads work for the large D-SIBs and advises the lead supervisor on recommendations and rating of operational risk in the overall risk assessment.
  - Operational risk is assessed as a component of all significant activities; where IT support functions are significant they are reflected as a separate activity line.
  - Operational risk management as a second line/challenge function is also scored within risk management.

### OSFI guidance and third-party risk
- OSFI issued its revised Operational Risk Management Guideline in June 2016.
  - The guideline formalizes and consolidates OSFI’s operational risk management expectations and outlines principles for effective operational risk management.
  - As it is principles based, expectations can be scaled to reflect the nature and complexity of institutions.
- Outsourcing and third-party risk:
  - OSFI has a separate guideline, published in 2001 and revised in 2009, for outsourcing.
  - Risk management principles in the outsourcing guideline are applied more broadly by OSFI to third-party risk management.
  - A cross sector review of third-party risk management and possible refreshing of the outsourcing guideline is foreseen in the next fiscal year.

### Financial Consumer Agency of Canada (FCAC): mandate, resources, and conduct work
- Mandate and resourcing:
  - FCAC supervises FRFIs’ compliance with consumer protection measures, promotes financial education, and raises consumers’ awareness of their rights and responsibilities.
  - FCAC has about 125 staff of which 27 are working in supervision, covering 376 FRFIs.
  - FCAC is implementing a new supervisory framework that adopts a more risk-based approach distinguishing Tier 1 (higher inherent risk) and Tier 2 (lower inherent risk) institutions; banks and payment card network operators are generally included in Tier 1.
- Consumer protection law and proposals:
  - The current consumer protection law does not contain “sound lending” or “best interest” provisions and only allows administrative penalties in case specific breaches of federal consumer legislation.
  - Proposals for new legislation to expand the scope of FCAC’s role were announced in November 2018; the intent and a concomitant increase in FCAC’s resources would further strengthen FCAC’s ability to effectively fulfill its mandate.
- Conduct reviews and coordination with OSFI:
  - Recognizing conduct issues related to household indebtedness, FCAC conducted thematic reviews and studies.
  - FCAC published in June 2017 a study on conduct issues and information gaps in home equity lines of credit (HELOCs).
  - In March 2018 FCAC published findings on the cross-sectoral examination of banks’ retail sales practices; this review was conducted concurrently and in close cooperation and coordination with OSFI (FCAC focusing on consumer risks and OSFI on governance and risk culture).

### Provincial deposit-taking institution supervision — AMF (Québec)
- Scope and structure:
  - AMF is Québec’s integrated financial sector regulator, established in 2004 under the Loi sur l’Autorité des marchés financiers (AMF Act); Act updated in June 2018.
  - AMF regulates nonbank deposit-taking, insurance, securities and derivatives and is the deposit insurer for the DTIs for which it is lead supervisor.
- Independence, funding, and resources:
  - AMF is operationally independent and has budgetary autonomy in practice; it is self-funded with funding coming from market participants.
  - Under s47 of the AMF Act, AMF must submit its budget estimates to the Minister of Finance for government approval.
  - AMF increased staff in the Solvency Department from 95 to 102, and in the deposit-taking directorate from 20 to 24.
  - Turnover is low and staff appear to have appropriate skills; AMF has a well-developed infrastructure for data collection and a strong data analytics function.
- Prudential context and risks:
  - Desjardins Group has a balance sheet of about Can$ 275 billion (as of end-2017), larger than one of the D-SIBs.
  - Dominance of Desjardins Group presents challenges for resourcing and concentration risk; supervisors do not oversee peer institutions.
  - AMF aligns with international standards and the federal regime (Basel III, ICAAP); introduced Residential Hypothecary Guideline equivalent to the B20 Guideline (OSFI).
  - AMF set no large exposure limits (not in AMF Act or guidance); intends to address this and coordinate with OSFI’s Large Exposures framework review.
  - Governance guideline updated in line with BCBS Principles for Corporate Governance issued July 2015.
- Capital and group provisions:
  - Desjardins Group has a common equity tier 1 ratio of around 17.5 percent, well in excess of the required 8.0 percent (which includes the capital conservation buffer (2.5 percent) and a D-SIFI add-on (1 percent)).
  - The AMF Act respecting Financial Services and Cooperatives contains provisions (s547.31 and s547.32) making all member caisses liable for the debts of the others.

### Provincial deposit-taking institution supervision — FICOM (British Columbia)
- Scope and entities:
  - FICOM supervises the credit union sector in British Columbia, responsible for prudential and market conduct supervision of provincially-regulated entities.
  - Oversees 42 credit unions with total assets of over Can$77 billion. (Footnote: shortly after assessment one large credit union became federally regulated bringing the total to 41; as of December 2018 the total assets of the 41 amount to USD 63.5 billion.)
  - Regulator of Central One Credit Union (C1) which provides services to credit unions in British Columbia and Ontario.
  - British Columbia credit unions must hold deposits with C1 equal to the lower of 8 percent of their liabilities or 1.5 percent of British Columbia system-wide assets.
  - Credit unions’ commercial lending limited to 30 percent of total assets (exposures above 30 percent risk-weighted with additional 150 percent; exposures above 35 percent risk-weighted at 200 percent).
  - FICOM also oversees 52 trust companies in British Columbia (46 extra-provincially registered; six hold a primary license but are not allowed to take deposits) and insurance companies.
- Institutional weaknesses and reforms:
  - FICOM lacks operational independence, being situated within the British Columbia Ministry of Finance.
  - Struggled to attract and retain resources; governing legislation (Financial Institutions Act of British Columbia) lacks flexibility with key requirements in primary legislation.
  - Has been unable to introduce formal Basel III capital and liquidity requirements, though it has started implementation of Pillar 2 and reporting and monitoring of the LCR and the NCCF.
  - British Columbia government announced intention to establish FICOM as an independent Crown agency in 2019 and contemplated changes including rule-making authority.
  - FICOM conducted a self-assessment, supported by an external advisor, on compliance with the BCP and Insurance Core Principles in preparation for reforms.
- Supervisory capacity and operational issues:
  - FICOM has a sound risk-based framework modelled on OSFI and runs housing market stress tests every two years.
  - Structural resource shortfall: 28 vacancies on about 111 positions as of March 2018; average time between completion of an onsite review and communication of findings to regulated entity has been six months.
  - Despite resourcing challenges, FICOM retains a core of committed and professional staff.
- Capital and concentration vulnerabilities:
  - Capital requirements for credit unions have weaknesses; need to move to a more Basel-III-type regime.
  - The Financial Institutions Act sets risk weights at 0 percent for CMHC insured mortgages.
    - This matches OSFI for banks but may be less appropriate for British Columbia housing exposures given lack of earthquake coverage.
  - Regulatory framework around C1 creates vulnerabilities:
    - Credit union exposures to C1 are zero risk-weighted despite C1 being a private organization with no government guarantee.
    - C1 functions as a systemically important financial market infrastructure (FMI) for the sector.
    - Operationally, funds in British Columbia and Ontario liquidity pools are jointly managed under one strategy and legally comingled under C1 ownership.
    - No framework for timely and full repayment of credit unions’ deposits or for allocating available funds among credit unions in a crisis.
    - No clear procedure for allocating C1’s liquidity across credit unions if multiple credit unions request liquidity support simultaneously.

### Differences across OSFI, AMF, and FICOM (risk weights and standards)
- OSFI and AMF:
  - Apply standardized risk weights in line with Basel III standards to standardized DTIs.
- FICOM:
  - Currently constrained by legislation from applying Basel III risk weights.
  - FICOM’s risk weights on residential mortgages are based on Basel I and are generally consistent with, or more conservative than, Basel III in some respects.
  - One divergence: FICOM applies a 35 percent risk weight to residential development loans against the Basel III standardized 100 percent.
  - FICOM accords zero risk weights to privately-insured mortgages even for the 10 percent not covered by the federal government guarantee (while OSFI adjusts risk weights accordingly for private mortgage insurers where the Government covers 90 percent of the risk).

### Cooperation and coordination: federal and provincial
- Federal cooperation:
  - Federal agencies cooperate and coordinate well in practice.
  - Examples:
    - FINTRAC and OSFI piloted coordinated onsite AML/CFT visits focusing on respective expertise while alerting each other to concerns.
    - OSFI and FCAC undertook a concurrent investigation into banks’ retail sales practices.
  - Information on prudential supervision is shared through FISC and policy developments are discussed in the SAC.
  - Federal institutions participating in FISC and SAC are members of the Board of the CDIC.
- Provincial cooperation:
  - Cooperation and coordination between provincial regulators appear well-developed.
  - Provincial regulators have forums and mechanisms (e.g., CUPS A meets quarterly) and regular information exchange.
- Federal–provincial coordination gaps and risks:
  - Coordination between federal and provincial agencies needs further development; informal staff collaboration is not consistent.
  - Policy inconsistencies create risk of regulatory arbitrage (e.g., four provinces provide unlimited deposit insurance for their credit unions while federally-regulated DTIs have a limit).
  - OSFI’s B20 guidance introducing stressing for residential mortgage borrowers was not fully communicated in advance to provincial authorities nor adopted by all regulators.
  - OSFI does not share prudential data with AMF; this limits AMF’s ability to compare Desjardins Group with D-SIBs and to supervise Desjardins Group with richer information on D-SIBs and the broader market.
  - FICOM is unable to share prudential data with authorities such as the BOC.
  - As a result of underdeveloped federal-provincial relationships there is no single authority with a system-wide view on the DTI sector in Canada.
- Recommendation:
  - The federal and provincial authorities should look for means of removing the barriers that prevent close and meaningful cooperation and adopt a more formalized framework for cooperation and information sharing.

*Source: 1canea2020005 - 52. The Canadian authorities have issued a national strategy for cyber security. The*

### 82. Some federal / provincial cooperation works well. FINTRAC has MoUs with the   relevant

### 1canea2020005 - 82. Some federal / provincial cooperation works well. FINTRAC has MoUs with the   relevant

### Federal / provincial cooperation and information sharing
- FINTRAC has MoUs with the relevant provincial regulators.
- Good coordination and communication between FINTRAC and FICOM are observed.
- AMF has established a MoU with FINTRAC.
- MoUs and working relationships with the BOC and CDIC have also been established for crisis management purposes.

### Household financial soundness (Figure 1 — key observations)
- The increase in household debt is significant, albeit concurrently with the increase in household wealth.
- Debt-servicing to income has been stable, though interest payment at a historically low level.
- Canadian households are among the most indebted, and their servicing obligations are also relatively high.
- Household borrowing has been largely driven by mortgage loans in recent years.
- Debt of financially weak households has gained a larger share over the past decade.
- British Columbia and Ontario face more heightened financial stability risks given their larger household debt-at-risk and downside risk to house prices.
- Sources cited: CMHC; Haver Analytics; Statistics Canada, Survey of Financial Security; and IMF staff estimates.
- Methodological notes from the figure:
  - "1/ The 5-percent house price-at -risk measures a potential decline in real house prices (year-on-year) three years ahead with a 5 percent probability."
  - "2/ Financially weak households are defined as households whose debt servicing   -to-income is above 40 percent. Debt of these financially weak households is considered at risk."

### Housing market developments (Figure 2 — key observations)
- Housing market imbalances have been driven by over-valued house prices and household financial weaknesses.
- House prices became more stabilized in the past two years.
- Immigrations appear to be an important driver of rapidly rising housing prices in some regions.
- A construction boom is evident in British Columbia, while Alberta saw a boom-bust cycle driven by oil prices.
- The slowdown in residential mortgage lending is largely led by the decline in insured mortgages.
- House price to income is relatively high in Canada and has increased significantly since 2012.
- Cities where house price-to-income most misaligned (i.e., overvalued) face larger downside risk to house prices.
- Sources cited: Canadian Real Estate Association; Haver Analytics; OECD; and IMF staff estimates.
- Methodological notes from the figure:
  - "1/ The housing market imbalances index comprises house prices, construction, inventory and sales, mortgage, and household balance sheet."
  - "2/ The 5-percent house price-at-risk measures a potential decline in real house prices (year-on-year) one year ahead with a 5 percent probability."

### Appendix I — Follow-up on 2014 Assessment recommendations (selected points)
- Overall: The FSAP followed up on the status of the implementation of the 2014 recommendations; an overview is provided in Annex Table 1.
- BCP 6 and 20 (Significant Interest and Ultimate Beneficial Ownership)
  - Current definition of beneficial ownership in the BA excludes indirect ownership through a (non-regulated) corporate body like a holding company: "The BA defines beneficial ownership as “ownership through one or more trustees, legal representatives, agents or other intermediaries.”"
  - Significant interest (direct or beneficial shareholding of 10 percent or more) needs Minister of Finance approval; changes in significant ownership in a holding company controlling the institution may not require the same approval.
  - OSFI’s powers to obtain additional information are limited to persons who control a bank and entities controlled by that person; powers do not extend to entities in which significant shareholders have a controlling or significant interest.
  - Significant influence is not included in the definition of significant interest; definition of control is adequate as it encompasses control in fact (instances with less than 50 percent shareholding but effectively control).
  - Related-party definition does not include indirect significant interest through a corporate body; OSFI can designate as a related party any person who could reasonably affect the exercise of the best judgment of the bank.
  - Systemic perspective: weakness is less material for D-SIBs but affects smaller FREs; priority should be given to closing this gap.
- BCP 19 (Concentration Risk)
  - OSFI is updating its guideline on large exposures and expects to issue a revised guideline early 2019.
  - Guidance on concentration risk management and definition of connected counterparties need to be updated to align with Basel standards for measuring and controlling large exposures, issued in April 2014 and taking effect January 2019.
  - OSFI should consider applying similar requirements (or monitoring under Pillar 2) to all Canadian licensed banks that are part of banking or financial groups on a solo basis.

### Appendix I — Table 1 selected implementation updates (high-level)
- BCP1 (Responsibilities, objectives and powers)
  - OSFI’s guidelines are enforceable in practice through capital orders, directions of compliance and other mechanisms; guidelines provide flexibility and ability to act quickly.
  - Assessors note that lack of formal enforceability could create potential for entities to delay or contest in less benign times.
- BCP2 (Independence, accountability, resourcing and legal protections for supervisors)
  - Prudential veto not formalized in legislation; in practice Order to Commence and Carry on Business is a Superintendent decision and Ministerial approvals are preceded by OSFI recommendations.
  - Assessors recommend codifying the prudential veto in the Bank Act and exempting supervisors from the government’s fiscal controls and administrative guidance.
- BCP3 (Cooperation and collaboration)
  - OSFI and AMF instituted a cooperation framework in 2015 with scheduled meetings; discussions on possible enhancements have been initiated.
  - Assessors recommend more frequent and structured arrangements for active and proactive information sharing between provincial and federal authorities.
- BCP4 (Permissible activities)
  - Scope of the federal system cannot encompass all deposit-taking entities of significance; authorities should assess and if necessary revise laws and arrangements to ensure soundness and stability of the entire Canadian financial system.
  - Assessors note AMF’s regulation and supervision of Desjardins mitigates this issue, and improved cooperation will mitigate it further.
- BCP5 (Licensing criteria)
  - Revised Corporate Governance Guideline (to be issued in September 2018) addresses assessment of fitness and properness of new board members and senior management.
  - OSFI is informed prior to appointments and can raise concerns; assessors recommend formalizing the informal vetting process.
- BCP6 (Transfer of significant ownership)
  - (a) OSFI considers it can obtain sufficient information through other channels and does not intend legislative amendment for annual standardized reporting of shareholdings.
  - (b) A legislative amendment to require banks to notify OSFI of material adverse changes affecting suitability of a major shareholder or controller is not being considered at this time.
  - Assessors refer to Subsection B of Annex 1 for detailed coverage.
- BCP7 (Major acquisitions)
  - The Substantial Investment Advisory was updated in 2015 requiring FREs to notify OSFI Lead Supervisor of any material investment where no approval is required but the acquisition is material or presents a significant change in business strategy.
  - Assessors noted and agreed with the update.

*Source: Excerpt from the IMF FSAP documentation contained in the supplied PDF content unit.*

### Appendix I. Table 1. OSFI: Progress on Implementing the BCP Assessment Recommendations 2014 (continued)

### Appendix I. Table 1. OSFI: Progress on Implementing the BCP Assessment Recommendations 2014 (continued)

### BCP8 — Supervisory approach
- Recommendation (a): Intensify analysis of groups from a legal entity-based perspective to complement examination of significant activities.
- OSFI response (a): Work being undertaken on initiatives such as Recovery Planning and review of the level and location of capital held within consolidated groups may be leveraged to address the recommendation.
- Assessors’ comments (a): OSFI has initiated some steps to increase its analysis of solo entities, including the analysis of the level of capital. We encourage OSFI to continue this progress, including the recommendations in this report around liquidity.
- Recommendation (b): Review the effectiveness of communication and coordination with nonbank regulators for entities within consolidated groups.
- OSFI response (b): The current state of informal interaction is deemed to be appropriate. However, as opportunities present themselves, OSFI may leverage the work of existing working groups to assess the need for greater communication and coordination with nonbank regulators outside Canada.
- Assessors’ comments (b): please see our full comments around coordination in the main body of this report.

### BCP9 — Supervisory techniques and tools
- Recommendation (a): Consider whether internal monitoring systems could be enhanced to further support the overarching, and risk-focused view of the institution to ensure timely actions and progress.
- OSFI response (a): OSFI periodically reviews its monitoring processes and believes the current monitoring processes, including tools that provide information on institution specific changes in risk profile, are appropriate. Processes provide emerging risks at the industry level for early identification. OSFI is building an information management system to further support existing processes regarding risk profile and issues management.
- Assessors’ comments (a): We believe that the institution-specific processes and tools that OSFI has in place work effectively and note that they are regularly updated.
- Recommendation (b): Introduce a requirement, through amendment to the Bank Act or otherwise, for a bank to notify OSFI in advance of any material adverse development in the institution.
- OSFI response (b): The Corporate Governance Guideline contains this expectation. OSFI also reinforces this requirement through speeches, public engagements, and meetings with FRFI boards or senior management.
- Assessors’ comments (b): we agree that this addresses the point.

### BCP10 — Supervisory reporting
- Recommendation: Review prudential data needs to support ongoing supervision, taking into account recent work on recovery and resolution planning which places greater focus on individual legal entities.
- OSFI response: No additional actions are recommended.
- Assessors’ comments: We note there have been a number of improvements since the last FSAP and further work is underway. Some elements could, however, be further enhanced (see paragraph 26).

### BCP12 — Consolidated supervision
- Recommendation (a): Require solo data for all regulated banks within consolidated banking groups where not already the practice; require periodic data on intra-group transactions.
- OSFI response (a): OSFI is obtaining incremental solo information via Recovery Plan work stream and expects banking groups to hold capital consistent with level and location of risk. OSFI will seek additional solo information as pertinent (e.g., more detailed balance sheet information, liquid asset information). Work completed includes:
  - Domestic systemically important banks must identify all banking entities engaged in deposit-taking activities, provide analysis and develop crisis management strategies for relevant jurisdictions; and
  - The US and UK regulators share views about regulated banking entities in their jurisdictions on a regular basis through ongoing information sharing processes.
- Assessors’ comments (a): We agree OSFI has worked to address this recommendation. We would comment that the analysis of the level of capital at the solo entity is rudimentary and recommend a more comprehensive approach for the main solo entities in banking groups.
- Recommendation (b): Formalize policy to always make access to parental data and notification of material parental business and governance changes a condition of licensing where the parent entity is not a regulated entity.
- OSFI response (b): In practice, OSFI obtains undertakings from a parent entity that is not a regulated entity, where the parent is engaged in financial activities; undertakings are intended to provide OSFI with access to parental data and information as needed.
- Assessors’ comments (b): We observed inconsistent approaches to obtaining undertakings. There is no standard template and they have not always been taken. We recommend a full review of relevant files and that a standard, comprehensive undertaking is put in place in all cases.

### BCP13 — Home–host relationships
- Recommendation: In recovery planning, consider and anticipate potential needs in a crisis of supervisors in jurisdictions where the Canadian entity is material.
- OSFI response: OSFI continues efforts to strengthen home/host cooperation in crisis management; not restricted in ability to consider potential needs of supervisors where the Canadian company is material. OSFI will follow FSB expectations on working with relevant non-CMG host jurisdictions. OSFI established outreach panels (first panel at start of 2016 focused on recovery and resolution plan updates, GSIB designation, and information sharing protocols; second panel in 2017). Non-CMG members and CDIC have actively participated.
- Assessors’ comments: OSFI is alert to its responsibilities here and has implemented regular colleges with host jurisdictions.

### BCP14 — Corporate governance
- No recommendation provided.

### BCP15 — Risk management process
- Recommendation: Review current prudential Guidelines relating to risk management against international standards and issue expanded or new guidance to close identified gaps, particularly in credit risk.
- OSFI response: OSFI remains of the view that its current suite of guidance and the review process for updating and developing new guidance achieves the purpose of covering important areas of risk management. Post FSAP, OSFI updated several guidance documents including publishing a self-assessment letter on Cyber risks and issuing a final version of guideline E-21: Operational Risk Management. See response in BCP17 for a list of updated guidelines and those under review.
- Assessors’ comments: Noted updates and new guidance largely address important and emerging issues. Policy development must be prioritized and some dated policies, such as Large Exposures, are overdue a revision.

### BCP16 — Capital adequacy (a)
- Recommendation (a): Consider whether the D-SIB capital surcharge should differ across banks according to their risk or systemic importance.
- OSFI response (a): All D-SIBs are subject to the same D-SIB capital surcharge. OSFI adopted a similar approach for the Pillar 2 Domestic Stability Buffer in June 2018 (set at 1.5 percent of RWA for all D-SIBs). D-SIBs may be subject to idiosyncratic Pillar 2 charges based on individual risk profiles.
- Assessors’ comments (a): We believe the principle of reviewing over time whether DSIB capital surcharges should vary remains valid but agree that from a microprudential perspective currently there is no obvious need for differentiating.

### BCP16 — Capital adequacy (b)
- Recommendation (b): Seek a formal BCBS Basel III FAQ regarding the ‘purchase for cancellation’ provision for Additional Tier 1 and Tier 2 capital instruments.
- OSFI response (b): OSFI believes it is appropriate that Additional Tier 1 and Tier 2 capital instruments could be purchased for cancellation at any time including the first five years—with the prior approval of the Superintendent. Common shares may be repurchased (with the Superintendent’s approval) at any time usually in a normal course issuer bid (NCIB), where a company is allowed to repurchase between 5 percent and 10 percent of its shares depending on how the transaction is conducted. Given the normal practice for common shares, OSFI believes it would not be appropriate to apply a higher standard to a lower quality instrument. This issue was raised in the 2014 RCAP; assessors accepted OSFI’s rationale and did not flag it as a deviation or recommend further guidance. Accordingly, OSFI believes seeking a formal FAQ is not required.
- Assessors’ comments (b): We note and agree the comments and that the 2014 RCAP did not raise this as a deviation, or for further follow-up.

### BCP17 — Credit risk
- Recommendation: Develop comprehensive guidance on credit risk management in line with international standards to ensure expectations and minimum standards are well understood.
- OSFI response: As due for review, OSFI will consider amending Guideline B-1: Prudent Person Approach to strengthen credit risk management requirements. Guideline Review Committee prioritizes guideline review. Guideline B-20 and B-21 provide detailed guidance on credit risk management for residential mortgage activities; B-20 was revised in October 2017. OSFI’s June 2016 Guideline on IFRS 9 Financial Instruments and Disclosures provides guidance on credit risk management processes focusing on monitoring changes in portfolio risks.
- Guidelines amended since last FSAP incorporating credit risk guidance:
  - E-22—Margin Requirements for Non-Centrally Cleared Derivatives 2017
  - E-23—Enterprise-wide Model Risk Management for Deposit-Taking Institutions
  - B-7—Derivatives Sound Practices
  - B-20—Residential Mortgage Underwriting Practices and Procedures (Effective January 1, 2018)
  - B-21—Residential Mortgage Insurance Underwriting Practices and Procedures 2014
- Guidelines under review:
  - B2 Guideline on Large Exposure DTI and Insurance
  - B3 Guideline on Prudent Reinsurance Practices
  - IFRS 17 Implementation
  - IFRS 9
- Assessors’ comments: OSFI has been proactive and risk-based in this area. Some aspects could however be further enhanced (see for example paragraphs 37 and 43 in the main body of the report).

### BCP18 — Problem assets, provisions and reserves
- Recommendation: Set out expectations with respect to problem asset management in comprehensive guidance on credit risk management (as in BCP 15 and BCP 17).
- OSFI response: No action required.

### BCP19 — Concentration risk and large exposure limits
- Recommendation: Strengthen large exposure reporting and monitoring regime to include regular regulatory reporting of compliance and notification of exposures greater than a specified level of capital; update Large Exposure Guideline (dating from 1994) in light of BCBS project and cover concentration risks more generally; reconsider higher exposure limit for subsidiary banks.
- OSFI response: OSFI is reviewing Guideline B-2: Large Exposure Limits. The revised guideline aims to:
  - Ensure banks continue to have prudent management of large exposures, contributing to safety and soundness;
  - Provide additional and clarified guidance on how banks should identify, measure, monitor, and control large exposures; and
  - Have regard to minimum international standards, where appropriate.
- Assessors’ comments: Noted and we recommend OSFI apply the Basel large exposure limit to all Canadian licensed banks that are part of banking or financial groups on a solo basis.

### BCP20 — Transactions with related parties
- Recommendation (a): Establish a more formalized regime, including regular regulatory reporting, for monitoring related-party transactions.
- OSFI response (a): OSFI is not pursuing the recommendation. OSFI has a very restrictive regime for transactions with related parties. A formal regulatory return would create burden with no added value in minimizing prudential risk.
- Assessors’ comments (a): We would encourage OSFI to review this periodically (see also Annex I subsection B).
- Recommendation (b): Consider whether the Bank Act limit on aggregate related-party exposures of 50 percent of capital to directors and officers should be lowered to a level more consistent with limits on large exposures.
- OSFI response (b): In the context of a future legislative review, OSFI has proposed that the statutory limit on transactions with directors, officers and their interests be aligned with OSFI’s limits on large exposures.
- Assessors’ comments (b): Noted. We support this proposal.

### BCP21 — Country and transfer risks
- Recommendation: Consider issuing guidance documenting expectations for management of country and transfer risks.
- OSFI response: OSFI will look at country and transfer risks and will update requirements if needed, taking into account BCBS guidance on sovereign risk, which is still under discussion internationally.
- Assessors’ comments: We note the intention to look at this again once the BCBS guidance is finalized.

### BCP22 — Market risk
- Recommendation: Clarify market risk management expectations for foreign bank branches and banks with small or no trading books, which are not subject to the Capital Adequacy Requirement Guideline on Market Risk.
- OSFI response: Chapter 9 of CAR is applied only to internationally active institutions—primarily DSIBs. CAR states if trading activity is significant OSFI can require compliance with Chapter 9—no threshold is provided because OSFI uses significance of the portfolio for the institution not a $ amount.
- Assessors’ comments: Noted. The approach is adequate.

### BCP23 — Interest rate risk in the banking book
- No recommendation provided.

### BCP24 — Liquidity risk
- Recommendation: Ensure supervisors maintain regular on-site coverage of liquidity risk management to verify effective application of policies and controls.
- OSFI response: In addition to planned liquidity work (regularly scheduled significant activity reviews and ongoing monitoring), OSFI will ensure planned work includes ongoing onsite coverage of liquidity risk management. OSFI will schedule onsite meetings with Corporate Treasury and “liquidity intensive” businesses to confirm FREs are applying liquidity risk management controls.
- Assessors’ comments: We are of the view that this risk is covered adequately in the on-site program and have taken note of OSFI’s (RSS) intention to intensify its liquidity risk monitoring and supervision.

### BCP25 — Operational risk
- Recommendation: Issue more comprehensive guidance on expectations for operational risk management, covering areas such as business continuity expectations.
- OSFI response: In June 2016, OSFI released the final version of Guideline E-21: Operational Risk Management, reinforcing expectations regarding management of operational risk through a consolidated piece of guidance.
- Assessors’ comments: OSFI has been investing more actively in operational risk guidance and oversight and is establishing a new Technology Risk Division distinct from the Operational Risk Division. See comments in the main body around supervision of nonfinancial risks.

### BCP26 — Internal control and audit
- No recommendation provided.

### BCP27 — Financial reporting and external audit
- Recommendation (a): As OSFI and the banks view Pillar 3 requirements as minimum required disclosure practice, OSFI should consider issuing Pillar 3 requirements in Guideline format.
- OSFI response (a): In April 2017, OSFI released the Pillar 3 Disclosure Requirements guideline for domestic systemically important banks on phase I of the revised Pillar 3 financial regulatory disclosure requirements. Remaining Pillar 3 requirements in Advisory form will be converted to guidelines during implementation of Pillar 3 phases II and III by the end of 2019.
- Assessors’ comments (a): This addresses the recommendation.
- Recommendation (b): Review best practices in other countries and consider publication of time series data sourced from regulatory returns to enhance public understanding of banks’ operations and risk profile.
- OSFI response (b): OSFI has an annual regulatory return change management process which includes governance of reviewing and approving all newly collected FRFI data for public consumption.

*Source: Appendix I. Table 1. OSFI: Progress on Implementing the BCP Assessment Recommendations 2014 (continued).*

### 1.17 of the Annual Regulatory Data Planning Business Processes

### 1.17 of the Annual Regulatory Data Planning Business Processes

### Data disclosure governance
- OSFI discloses current and historical data where external stakeholders can select as many distinct filing dates as they want (one at a time) and build a time series of their own.
- The authorized set of publicly disclosed data are published at the OSFI website http://www.osfi-bsif.gc.ca/Eng/wt-ow/Pages/fd-df.aspx.
- Assessors’ comments: Assessors are aware that OSFI has this matter under periodic review and would encourage steps towards a public data base which is easily accessed with consistent data across the industry.

### BCP29 — Abuse of financial services (recommendations and OSFI response)
- Recommendation (a): It is recommended that OSFI explicitly state its expectation that banks’ compliance officer (CAMLO) is appointed at the management level.
- Recommendation (b): It is also recommended that Guideline (B-10) on Outsourcing of Business Activities, Functions and Processes be amended to more clearly establish the requirement that the screening processes that are in place when the bank is entering into outsourcing relationships will ensure high ethical and professional standards.
- OSFI response to (a): As it becomes due for review, OSFI will consider amending Guideline B-8: Deterring and Detecting Money Laundering and Terrorist Financing, to explicitly require that banks’ compliance officers be appointed at the management level.
- Assessors’ comments on (a): OSFI advises that they will look to make this change when the guideline is next due for review which they expect to be within the next two years.
- OSFI response to (b): As it becomes due for review, OSFI will consider amending Guideline B-10: Outsourcing of Business Activities, Functions and Processes, to explicitly require that the screening processes that are in place when the bank is entering into outsourcing relationships will ensure high ethical and professional standards.
- Assessors’ comments on (b): noted and agreed.

### Main regulatory developments since 2014 (federal statutes and overarching changes)
- Several amendments have been made to the Bank Act (BA) and the Trust and Loan Companies Act (TLCA) since 2014.
- 2014: BA amended to add regulation-making powers respecting a bank’s activities in relation to derivatives and benchmarks; additional amendments to discontinue OSFI supervision of provincial central cooperative credit societies and to facilitate entry of provincial cooperative credit societies into the federal credit union system by simplifying continuation and amalgamation.
- 2015: Further amendments to the BA and the TLCA to enhance protection of prescribed supervisory information that relates to FRFIs.
- 2016: BA amended to (i) facilitate continuance of local cooperative credit societies as federal credit unions by granting the Minister of Finance the authority to provide transitional procedural exemptions and a loan guarantee; and (ii) allow the designation of domestic systemically important banks by the Superintendent of Financial Institutions and require such banks to maintain a minimum capacity to absorb losses.
- June 21, 2018: Additional amendments to the BA and the TLCA to extend the scope of activities related to financial services in which federal financial institutions may engage, including activities related to financial technology, and to modernize provisions applicable to information processing and information technology activities. These amendments are not yet in force.
- 2017–18: The Department of Finance consulted stakeholders on legislative proposals to modernize provisions of the Bank Act, Trust and Loan Companies Act and Insurance Companies Act concerning corporate governance of federally-regulated financial institutions. Legislation is anticipated to be introduced in 2019.
- OSFI has been steadily updating its guidelines in line with the regulatory reform agenda of the international standard setting bodies.

### OSFI guidelines issued or updated since the previous assessment (selected items and specific changes)
- Capital Adequacy Requirements — updates:
  - 2019 (to be finalized) — incorporated domestic implementation of the standardized approach to counterparty credit risk (SA-CCR) and the revisions to the capital requirements for bank exposures to central counterparties (CCPs) as well as revisions to the securitization framework.
  - 2018 — incorporated necessary amendments to implement the Total Loss Absorbing Capacity regime and for capital treatment of allowances as a result of the adoption of IFRS 9; incorporated changes to the output floor.
  - 2017 — clarified application to federal credit unions regarding qualifying capital instruments, deductions from capital and transitioning of non-qualifying instruments; revised treatment of insured residential mortgages to emphasize that credit risk insurance is a risk mitigant (guarantee) that relies on the due diligence of a mortgage originator; clarified how national discretion will be exercised in the implementation of the countercyclical buffer, including reciprocity of countercyclical buffers put in place in other jurisdictions; implemented the equity investment in funds rules issued by the Basel Committee on Banking Supervision (BCBS).
  - 2016 — introduced a downturn loss given default floor for uninsured residential mortgages (2017 for insured mortgages).
  - 2014 — introduced the credit valuation adjustment capital charge.
- Liquidity Adequacy Requirements — introduced in 2014 to incorporate BCBS liquidity requirements:
  - OSFI implemented the Liquidity Coverage Ratio (LCR) standard in January 2015 with a minimum requirement of 100 percent (i.e. , no phase-in).
  - OSFI incorporated the standardized Basel III liquidity monitoring tools in 2015.
  - In 2015 OSFI formalized the use of the domestic Net Cumulative Cash Flow (NCCF) metric as a supervisory tool; the NCCF is not a standard with a uniform minimum requirement, but OSFI communicated a private target tailored to each supervised institution.
  - OSFI communicated its intention to implement the Net Stable Funding Ratio (NSFR) in January 2020.
- Leverage Requirements (Draft) — introduced in 2014 and updated in 2018:
  - Revised version will 1) incorporate the Standardized Approach to Counterparty Credit Risk (SA-CCR) for calculating derivatives exposures; 2) include changes to the treatment of securitized assets that meet the operational requirements for recognition of significant risk transfer (SRT) to align with proposed revisions to the Capital Adequacy Requirements guideline; and 3) align treatment of the credit conversion factors for off-balance sheet securitization exposures with those under the proposed revisions to the CAR guideline.
- Total Loss Absorbing Capacity — introduced in 2018 to implement the TLAC regime; sets out framework to assess whether a Domestic Systemically Important Bank maintains its minimum capacity to absorb losses pursuant to subsection 485(1.1) of the BA.
- Total Loss Absorbing Capacity Disclosure Requirements — introduced in 2018 to implement disclosure requirements for the TLAC regime for Domestic Systemically Important Banks; incorporates the TLAC disclosure templates published in the BCBS Pillar 3 Disclosure Requirements—consolidated and enhanced framework standards (issued in March 2017); will be in force as of September 2018.
- D-11 Public Disclosure Requirements for Domestic Systemically Important Banks on Liquidity Coverage Ratio — introduced in 2014 to set out public disclosure requirements regarding the LCR for Domestic Systemically Important Banks.
- D-12 Leverage Ratio Disclosure Requirements (Draft) — introduced in 2014, with a revised version to be issued in late 2018; provides clarification on the implementation of the BCBS LR disclosure requirements and will include minor consequential amendments to reflect amendments to OSFI’s Leverage Requirements and Capital Adequacy Requirements guidelines.
- IFRS 9 Financial Instruments and Disclosures — introduced in 2016 to provide guidance on the application of IFRS 9, addressing the expected loss framework, fair value option and various disclosure requirements; will consolidate a number of existing guidelines to be removed beginning in November 2018.
- Pillar 3 Disclosure Requirements — introduced in 2017 to clarify OSFI’s expectations regarding domestic implementation of the Revised Pillar 3 Disclosure Requirements issued by the BCBS in January 2015.
- Corporate Governance (Draft) — updated final version to be issued in September 2018; will be more principles based and outcomes based, more clearly delineate board and senior management responsibilities and consolidate board requirements contained in other risk management or capital guidance.
- B-7 Derivatives Sound Practices — updated in 2015 to reflect OTC derivatives market reforms, expectations for central clearing of standardized OTC derivatives and reporting derivatives data to a trade repository; reflects current practices with respect to risk management of derivatives activities.
- E-13 Regulatory Compliance Management — issued in 2014; sets out OSFI’s expectations for management of regulatory compliance risk enterprise-wide.
- E-20 CDOR Benchmark-Setting Submissions — introduced in 2014 to assist Canadian Dollar Offered Rate submitting banks in establishing governance and controls to maintain confidence in CDOR.
- E-21 Operational Risk Management — introduced in 2016 to reinforce OSFI’s principles-based expectations regarding management of operational risk.
- E-22 Margin Requirements for Non-Centrally Cleared Derivatives — introduced in 2017 to require exchange of margin consistent with BCBS and IOSCO requirements.
- E-23 Enterprise-wide Model Risk Management for Deposit-Taking Institutions — introduced in 2017 to establish expectations for managing and controlling use of models for regulatory capital, internal risk management, valuation/pricing, business decision-making or stress testing.

### Residential mortgage underwriting and related OSFI guidance
- B-20 Residential Mortgage Insurance Practices and Procedures — introduced in 2012 and updated in 2017; builds on Financial Stability Board’s Principles for Sound Residential Mortgage Underwriting Practices and OSFI’s domestic supervisory work; sets out five fundamental principles for prudent residential mortgage underwriting.
  - 2017 update key changes: revised stress test; requirement for lenders to establish and adhere to appropriate loan to value ratio limits; restriction on lending arrangements designed to (or appear so) circumvent loan to value limits.
- B-21 Residential Mortgage Insurance Underwriting Practices and Procedures — introduced in 2014 to set out OSFI’s expectations for prudent residential mortgage insurance underwriting and related activities (does not apply directly to banks; based on principles in B-20).

### Québec — Bill 141 and AMF regulatory and guideline changes
- Bill 141 enacted on June 13, 2018: amendments to the AMF Act respecting financial cooperatives services to:
  - add a scheme to supervise and control deposit institution business and authorized deposit institutions, including commercial practices standards, prudential and governance rules, the auditor’s role, the conditions for authorizing a deposit institution, the review of such an authorization in various circumstances and the revocation or suspension of, or the attachment of conditions or restrictions to, such an authorization;
  - determine the AMF’s responsibilities and powers with regard to supervision and control;
  - add the possibility for the AMF, as the insurer of deposits made with authorized deposit institutions, to take different measures to reduce the risk to the AMF or to avert or reduce a threatened loss to the AMF and to plan operations to resolve problems that could arise from the failure of financial institutions belonging to a cooperative group;
  - prescribe miscellaneous prohibitions and monetary administrative penalties; and
  - set the conditions under which the Minister of Finance may enter into agreements allowing a cooperative outside Québec having a mission similar to that of a financial services cooperative to obtain an authorization to carry on deposit institution activities in Québec.
- AMF guidelines introduced or updated:
  - Capital Guideline — came into effect on May 1, 2015; clarifies expectations regarding implementation by financial institutions of an internal assessment process of their risks in connection with their capital (ICAAP).
  - Integrated Risk Management Guideline (Update) — updated on May 1, 2015 to take into account new expectations relating to ICAAP and to clarify expectations on risk appetite and links between the risk management framework, solvency, strategic objectives and their communication within the board and senior management.
  - Risk Data Aggregation and Risk Disclosure Guideline (New) — came into effect on February 1, 2016; exclusively applicable to federations of credit unions governed by An Act respecting financial services cooperatives, CQLR, c. C-67.3; expects implementation of a framework enabling proper aggregation of all material risk data and disclosure to market participants in an accurate, timely manner appropriate to the circumstances; expects accuracy, adaptability and timeliness of material risk data based on a control framework governing the data aggregation process; expects risk data aggregation capability to be effective at all times, even during a crisis; reports produced shall enable stakeholders to clearly track the institution’s ongoing exposure to risk and the effectiveness and efficiency of measures for handling risk.
  - Governance Guideline (Update) — completely revised with effective date September 15, 2016; aims to complete and clarify roles and responsibilities expected from the Board of Directors, reinforce importance of independence and promote a transparent, ethical and responsible corporate culture; discusses roles of the Chairman of the Board and the Audit Committee in more detail.
  - Operational Risk Management Guideline (New) — came into effect on December 1, 2016; aims to promote strengthening of the risk culture and clarifies roles of the board, senior management and the different lines of defense in identification, assessment, control, mitigation and oversight of operational risk.
  - Compliance Guideline (Update) — effective April 15, 2017; updated to ensure consistency with other AMF Guidelines including Governance and Integrated Risk Management; reinforced the importance of effective and efficient compliance management and added an expectation specifying the roles and responsibilities of the various lines of defense, including those of the Chief Compliance Officer.
  - Residential Hypothecary Lending Guideline (Update) — updated version published in March 2018 to avoid regulatory arbitrage in the Canadian housing market and ensure a level playing field relative to federal institutions subject to OSFI’s updated B-20; includes new provisions on mortgage underwriting standards and stress testing (equivalent to OSFI B-20).
    - Note: Although AMF’s Guideline came into force in March 2018, an agreement with the Desjardins Group in fall 2017 had Desjardins, as a D-SIFI, comply with the new provisions as of January 1st, 2018.
  - Fair Consumer Credit Practices Guideline (New) — came into effect in July 2018; AMF closely monitored household debt because it was materially related to the credit risk of financial institutions.

*Source: 1.17 of the Annual Regulatory Data Planning Business Processes (excerpt) — OSFI/AMF/Canada regulatory developments and guideline summaries.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1canea2020005.pdf_