Canada: Federal Financial Institutions Legislative And Regulatory Reporter – May 2022

Published

Title and Brief Summary

Status

Office of the Superintendent of Financial Institutions (OSFI)

May 26, 2022

Draft Guideline: Guideline B-15, Climate Risk Management.

OSFI has released a drafted version of Guideline B-15: Climate Risk Management, proposing a framework to guide federally regulated financial institutions in their climate-related governance and risk management practices. OSFI welcomes comment to draft Guideline B-15 before August 19, 2022.

Comment by August 19, 2022

May 20, 2022

Proposed Revisions to Guideline E-23 on Model Risk Management

In September 2017, OSFI issued Guideline-E23: Enterprise-Wide Model Risk Management for Deposit-Taking Institutions, which set out OSFI's expectations on the life cycle approach to managing the use of models by federally regulated deposit taking institutions (DTIs).

OSFI plans to expand the scope of Guideline E-23 to address emerging risks and to clarify OSFI's expectations that all federally regulated financial institutions (FRFIs) and federally regulated pension plans (FRPPs) appropriately assess and manage model risks at the enterprise level. OSFI will take a balanced approach that is reflective of proportionality considerations for FRFIs and FRPPs based on the model risk management framework under which they operate. OSFI's risk-based approach will also recognize FRFIs' and FRPPs' desire to innovate and preserve agility in model development while maintaining the importance of appropriate model risk management.

OSFI plans to launch a consultation on Guideline E-23 in March 2023, with final guidance planned for publication by the end of 2023 and target implementation by June 2024. At this point, OSFI is seeking input from stakeholders on the expanded scope of application and models along with any other element of the current Guideline E-23 where additional detail or greater clarity would be beneficial.

Comment by June 30, 2022

May 16, 2022

OSFI's expectations for CDOR Transition

The OSFI supports the move towards more robust interest-rate benchmarks, including efforts to transition the Canadian financial system to primarily using the Canadian Overnight Repo Rate Average (CORRA) in place of the Canadian Dollar Offered Rate (CDOR). The confirmation of CDOR cessation dates begins a critical phase in the transition to alternative reference rates in Canada. As a result, OSFI expects FRFIs and FRPPs with transactions linked to CDOR will make every effort to ensure a seamless transition to new reference rates, prior to the respective cessation dates.

May 18, 2022

Chief Actuary of Canada Seeks External Peer Review Panel for 31^st Actuarial Report on the Canada Pension Plan

The Office of the Chief Actuary (OCA) is commissioning an external peer review of its next (31) Actuarial Report on the Canada Pension Plan (CPP), expected to be released in December 2022.

Application forms and the terms of reference are available and must be submitted before the end of the day on July 15, 2022. Previous CPP actuarial reports and independent peer reviews are also available.

Submissions by July 15, 2022

International Association of Insurance Supervisors (IAIS)

IAIS' Holistic Framework Virtual Roundtable

The IAIS will hold a virtual public roundtable on the implementation of IAIS' Holistic Framework, designed to assess and mitigate systemic risk in the global insurance sector. This IAIS virtual roundtable will take place 13.00-15.30 CEST on Tuesday, July 19, 2022. To register for this event, see here.

Bank of Canada

May 16, 2022

CARR Welcomes RBSL's Decision to Cease the Publication of CDOR After June 28, 2024

Canadian Alternative Reference Rate Working Group (CARR) has signalled its support of Refinitiv Benchmark Services (U.K.) Limited's (RBSL) announcement that it would cease publication of CDOR after June 28, 2024. Alongside this announcement:

Following RBSL's decision, CARR has published two supporting documents:

• A transition roadmap that outlines the processes and timelines needed for the transition from CDOR for Canadian market participants.
• A consultation for a potential forward-looking Term CORRA benchmark to replace CDOR in certain types of loan facilities. This consultation will form the basis of any decision to create such a rate.

Comments by June 13, 2022

Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)

May 5, 2022

Sectoral and Geographic Advisory: Underground Banking through Unregistered Money Services Businesses

This advisory focuses on money laundering and terrorist activity financing risks associated with underground banking through unregistered money services businesses; and describes key attributes of underground banking in Canada, particularly as carried out by unregistered money services businesses in Metro Vancouver, the Greater Toronto Area, and, to a lesser extent, in the Calgary-Edmonton Corridor.

Payments Canada

Upcoming Changes to Rules, Procedures & Standards

• Rules B9, D4, E3, and K5 - Administrative amendments to reflect the addition of a new Automated Clearing Settlement System (ACSS) Direct Clearer.
• Rule B1, K4 and Lynx Rule 3 - Amendments to the ACSS and Lynx Rules to move the Service Level Description (SLD) attestation due date in the rules from January 31 to March 1.
• Rule H1 - Amendments to update the pre-authorized debit rule.
• Rule C1 - Addition of a new rule related to members' ability to maintain ACSS connections outside of Canada.
• Rule A10 and A4 - Amendments to clarify/update the return reasons for bank drafts and certified cheques.
• Standard 005 - Amendments to clarify Standard 005 provisions raised by new Direct Clearer.
• Rule A1, B1, G3, G12, H6, L3, J10 and ACSS Rules Introduction - ACSS consequential amendments related to the repeal of the Large Value Transfer System (LVTS) Rules.
• Removal of LVTS Rules - Repeal of LVTS Rules.
• Lynx Rule 1, Rule 2, Rule 3, Rule 4, Rule 5, Rule 6, Rule 7, Rule 8, Rule 9, Rule 10, Rule 11, Rule 12, Rule 14, TSP 001,TSP 002 and TSP 003 - Amendments to the Lynx Rules to accommodate the use of ISO 20022 MX messages for the exchange of Lynx payments.

Bank for International Settlements (BIS)

May 31, 2022

Basel Committee finalises principles on climate-related financial risks, progresses work on specifying cryptoassets' prudential treatment and agrees on way forward for the G-SIB assessment methodology review

At its meeting on May 27, the Basel Committee:

• Approved a finalized set of principles for the effective management and supervision of climate-related financial risks, to be published in the coming weeks.
• Achieved progress on specifying a prudential treatment of cryptoassets and issuing a second consultation paper;
• Agreed on a way forward to reflect developments in the European banking union (EBU) on the assessment methodology for global systemically important banks (G-SIBs);
• Reported on its continuing efforts to assess risks to and vulnerabilities of the global banking system, including those ensuing from the conflict in Ukraine.

May 23, 2022

Central Banks Highlight Ways to Tackle Private Debt Build-Up in the Wake of the Pandemic

A new report, Private Sector Debt And Financial Stability (CGFS Papers No. 67) published by the Committee on the Global Financial System (CGFS) addresses emerging debt vulnerabilities including high debt among weaker businesses and a booming housing market, suggesting ways for policymakers to tackle these vulnerabilities in this uncertain post-pandemic macroeconomic environment.

Canada Deposit Insurance Corporation (CDIC)

May 2, 2022

Changes to Expand CDIC Deposit Protection Now in Effect

The Canada Deposit Insurance Corporation (CDIC) is ushering in the second phase of changes to further expand and strengthen deposit protection. The following changes are in effect as of April 30, 2022:

• Separate coverage for up to $100,000 in eligible deposits held in Registered Education Savings Plans (RESPs)
• Separate coverage for up to $100,000 in eligible deposits held in Registered Disability Savings Plans (RDSPs)
• New rules to strengthen the protection of eligible deposits held in trust and eligible deposits placed through brokers

Legislation

May 10, 2022

Budget Implementation Act, 2022, No. 1

Bill C-19, An Act to implement certain provisions of the budget tabled in Parliament on April 7, 2022 and other measures (44^th Parliament, 1^st session, November 22, 2021, to present) has completed second reading and been referred to the Standing Committee on Finance (House of Commons).

This proposed legislation is set to amend:

• Canada Deposit Insurance Corporation Act by adding the President and Chief Executive Officer of the Canada Deposit Insurance Corporation and one other member to that Corporation's Board of Directors.
• Trust and Loan Companies Act and the Insurance Companies Act to, among other things, modernize corporate governance communications of financial institutions.
• Insurance Companies Act to permit property and casualty companies and marine companies to not include the value of certain debt obligations when calculating their borrowing limit.