The Office of the Superintendent of Financial Institutions (OSFI) is seeking public comment on proposed revisions to guideline B-12 Interest Rate Risk Management. The guideline, which was last issued in 2005, provides a risk control framework for managing interest rate risk to prudent level at financial institutions.
“Interest rate risk is an important risk that can affect the safety and soundness of financial institutions,” OSFI states in the draft guideline. The federal financial institutions regulator believes “that a control framework that manages this risk to prudent levels is a fundamental component of sound banking practice.”
The object of OSFI’s proposed revisions is to “ensure that the guideline remains current and comprehensive with respect to defining a risk control framework” for measuring, managing, monitoring and controlling interest rate risk in the banking book.” The Basel Committee released its revised standards in 2016.
Among other things, the revisions provide added guidance for banks’ governance processes for dealing with interest rate risk, including, “the development of stress and shock scenarios, as well as key behavioural and modelling assumptions institutions should consider.”
The draft guideline is out for comment until Nov. 19. If approved, it is expected to take effect on Jan. 1, 2020.