FEDERAL FINANCIAL INSTITUTIONS LEGISLATIVE AND REGULATORY REPORTER
FINANCIAL INSTITUTIONS MONTHLY REPORTER
The Reporter provides a monthly summary of Canadian federal legislative and regulatory developments of relevance to federally regulated financial institutions. It does not address Canadian provincial financial services legislative and regulatory developments, although this information is tracked by BLG and can be provided on request. In addition, purely technical and administrative changes (such as changes to reporting forms) are not covered.
[Applicable to Banks,
December 21, 2016
Trust and Loan
Title and Brief Summary
Draft guideline: Enterprise-Wide Model Risk Management for Deposit-Taking Institutions (No. E-23)
Comments should be provided by February 28, 2017.
This proposed guideline aims to establish a common baseline understanding of OSFI's expectations of federally regulated deposit-taking institutions around the use of models enterprisewide. It outlines prudent practices for internal model development, review, approval, use and modification and is applicable to all models that have a material impact on the risk profile of an institution.
The draft guideline distinguishes between OSFI's expectations for those institutions that are approved to use internal models for regulatory capital purposes and those that are not. The guidance also considers specific challenges that the usage of models pose for small and medium sized institutions.
FINANCIAL INSTITUTIONS MONTHLY REPORTER | JANUARY 2017
Published December 20, 2016
[Applicable to Federally Regulated Life Insurance Companies (including Fraternal Benefit Societies) and Insurance Holding Companies]
Issued December 19, 2016
Title and Brief Summary
Effective June 17, 2017, amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and associated Regulations will result in new obligations related to politically exposed persons (domestic and foreign) (PEPs) and heads of international organizations.
FINTRAC has published guidance describing these obligations and has updated guidelines 3A, 3B, 5, 7A, 7B, 8A, 8B, 8C, 10A and 10B to indicate upcoming minor changes to suspicious transaction, large cash transaction, casino disbursement and terrorist property reporting forms, as well as a change to our reference to the Bank of Canada's exchange rate.
Draft Advisory: Deferral of IFRS 9 Application for Federally Regulated Life Insurers
The Advisory is in response to the September 2016 International Accounting Standards Board (IASB) approved amendment to the IFRS 4 Insurance Contracts allowing companies whose activities are predominately connected with insurance to defer the application of IFRS 9 Financial Instruments before January 1, 2021.
Comments should be provided on or before January 31, 2017.
Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts, OSFI has considered the costs and benefits and found a strong prudential need for additional accounting guidance for Life Insurers. OSFI believes the IASB amendment can lead to inconsistencies amongst Life Insurers. As such, this Advisory will provide for a level of consistency and comparability across the federally regulated life insurance industry.
[Applicable to federally regulated mortgage insurers]
Issued December 15, 2016
Title and Brief Summary
Final advisory on Capital requirements for Federally Regulated Mortgage Insurers
The Advisory incorporates revisions resulting from the public consultation process and will replace the Advisory "Interim Capital Requirements for Mortgage Insurance Companies".
The Advisory defines a new approach for the regulatory capital requirements for mortgage insurance risk that is more risk sensitive and incorporates key characteristics such as borrower creditworthiness, outstanding loan balance, loan-to-value ratio, and remaining amortization. It also ensures a level of conservatism in the protection provided to policyholders and other creditors of the mortgage insurers, and is adaptable to future changes.
Effective January 1, 2017.
[Applicable to banks, bank
December 9, 2016
trust and loan
Capital Adequacy Requirements (CAR) 2017
The proposed revisions will:
Provide clarification on how the CAR Guideline will apply to federal credit unions.
Emphasize that credit risk insurance is a risk mitigant (guarantee) that relies on the due diligence of a mortgage originator with respect to the requirements of a mortgage insurance contract.
Introduce a downturn loss given default (DLGD) floor which applies to institutions using an internal rating based (IRB) approach for loans secured by residential real estate.
Provide clarification on how OSFI will exercise national discretion in the implementation of the countercyclical buffer, including the reciprocity of countercyclical buffers put in place in other jurisdictions.
Require institutions to hold adequate capital against equity investments in funds.
The implementation date for these changes is set for November 1, 2016 for institutions with an October 31 year end, and January 1, 2017 for institutions with a December 31 year end.
FINANCIAL SERVICES REGULATORY GROUP
National Leader Jeffrey S. Graham
Toronto 416.367.6174 firstname.lastname@example.org
Regional Leaders Olivier Tardif Stephen J. Redican Sean Muggah
Montral Toronto Vancouver
514.954.2642 416.367.6134 604.640.4020
email@example.com firstname.lastname@example.org email@example.com
Insurance Corporate Regulatory Contacts
2017 Borden Ladner Gervais LLP
BORDEN LADNER GERVAIS LLP LAWYERS | PATENT & TRADEMARK AGENTS
Calgary Centennial Place, East Tower 1900, 520 3rd Ave S W, Calgary, AB, Canada T2P 0R3 T 403.232.9500 | F 403.266.1395 Montral 1000 De La Gauchetire St W, Suite 900 Montral, QC, Canada H3B 5H4 T 514.879.1212 | F 514.954.1905 Ottawa World Exchange Plaza, 100 Queen St, Suite 1300 Ottawa, ON, Canada K1P 1J9 T 613.237.5160 | F 613.230.8842 (Legal) F 613.787.3558 (IP) | firstname.lastname@example.org (IP) Toronto Bay Adelaide Centre, East Tower 22 Adelaide St W, Suite 3400, Toronto, ON, Canada M5H 4E3 T 416.367.6000 | F 416.367.6749 Vancouver 1200 Waterfront Centre, 200 Burrard St, P.O. Box 48600 Vancouver, BC, Canada V7X 1T2 T 604.687.5744 | F 604.687.1415 blg.com
Borden Ladner Gervais LLP is an Ontario Limited Liability Partnership.