Federal banking regulators have finalized a new guideline for banks involved with setting the financial benchmark, the Canadian Dollar Offered Rate (CDOR).
In the wake of the LIBOR market manipulation scandal, the Office of the Superintendent of Financial Institutions (OSFI) said that it will supervise the governance and internal controls surrounding banks’ CDOR submission processes. Back in May, it published draft guidelines for establishing governance and controls at submitting banks, which it says are designed to bolster confidence in CDOR as a robust interest rate benchmark in Canada.
Following a review of the comments received on the draft guideline, OSFI Friday issued the final version, which is slated to take effect by December 31.
“There have not been reports of problems with CDOR similar to those with LIBOR. Nevertheless, given the importance of CDOR to the Canadian financial system, Canadian authorities are working to enhance oversight of CDOR,” OSFI notes. “As CDOR submissions are coming solely from within major Canadian banks, OSFI intends to supervise the effectiveness of governance and internal controls surrounding banks’ CDOR submission processes.”
OSFI says that it will contact each bank involved in CDOR setting to discuss the supervisory work that will underpin the new guideline, including the nature of information that will be reviewed by OSFI, and the frequency with which banks will be expected to provide information.
The regulator also notes that the industry is working to strengthen governance of CDOR itself in order to comply with principles established by International Organization of Securities Commissions (IOSCO) for financial benchmarks. It notes that the industry has released a code of conduct for submitters, and announced a process to establish an administrator for CDOR.