Final version reflects several revisions made to the draft version in response to stakeholder feedback related to credit risk, securitization, and market risk.
Some revisions align the final guideline with current practice, including the application of the Credit Valuation Adjustment (CVA) alternative treatment.
C-OSFI will implement a streamlined application process for Small and Medium-sized Banks (SMSBs) to use the Internal-Ratings Based (IRB) approach to credit risk.
Also releasing an updated version of the Assessment of Regulatory Capital Models for Deposit-Taking Institutionsimplementation note.
Consolidated IRB implementation notes on data maintenance, risk quantification, collateral management principles, validating risk rating systems, and use of ratings.
Also consolidated estimates of default and loss, and oversight expectations; all consolidated materials are in a single document.
Key Changes
Lowering of capital requirements under the Standardized Approach (SA) and the IRB approach for Corporate small and medium-sized enterprise (SME) exposures.
Lowered certain risk weights, increased certain maximum exposure threshold of Small Business Entities (SBEs) that qualify for lower regulatory retail risk weights.
Reduced risk weight for exposures to Systemically important banks (SIBs).
Risk weight reduced for exposures to provincially regulated deposit-taking institutions designated as Domestic systemically important financial institution (D-SIFI).
Changes to treatment of Land Acquisition, Development, and Construction (ADC) exposures under SA to increase granularity, risk sensitivity of capital treatment.
Revised IRB approach for the Downturn Loss Given Default (LGD) floor add-on to the institution’s long-run LGD estimate for exposures secured by residential real estate.
For some exposures with 1250% risk weight, guideline allows institutions to deduct the exposure from Common Equity Tier 1 (CET1) instead of applying a 1250% risk weight.
Securitization exposures, including synthetic securitization transactions, standardized risk weight ceiling, clarifications related to securitizations, deductions from CET1.
Use of ratings modifications, clarification of what arrangements commitments include.
Market risk requirements related to sovereign exposures, credit spreads in market risk capital, certain maturity assignments, updates to monitoring/approval requirements.
Effectiveness
Guideline takes effect Nov. 1, 2026 or Jan. 1, 2027 for institutions with a fiscal year ending Oct. 31 or Dec. 31, respectively.
