Canadian banking regulators are updating their guidelines for banks’ liquidity risk management practices.
The Office of the Superintendent of Financial Institutions has published revisions to its guideline concerning liquidity risk management. The revisions aim to bring OSFI’s guidelines into line with reforms adopted by the Basel Committee on Banking Supervision in the wake of the financial crisis. OSFI says it also intends to introduce a set of quantitative liquidity standards, metrics and disclosure requirements in the future.
Following the financial crisis, which revealed weaknesses in liquidity risk management at a number of financial institutions, the Basel Committee issued updated international best practices in late 2008. In early 2009, OSFI indicated that it would update its principles, as the current guideline no longer reflects international best practices.
The guideline sets out prudential considerations relating to the liquidity risk management programs of federally regulated deposit-taking institutions and bank holding companies, and provides the framework within which OSFI assesses the content and effectiveness of the liquidity risk management of a bank.
OSFI released a draft guideline for public consultation in November 2011. The revised guideline is to be effective upon issuance.