OSFI Issues The Draft Guideline E-23 For Public Consultation On Enterprise-Wide Model Risk Management

On December 21, 2016, the Office of the Superintendent of Financial Institutions Canada ("OSFI") released for comment its draft Guideline E-23 Enterprise-Wide Model Risk Management Guideline (the "draft Guideline").

The draft Guideline aims to establish a common standard for federally regulated deposit-taking institutions to establish sound practices for an enterprise-wide and principles-based model risk management framework. 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.

Importantly, the draft Guideline distinguishes between OSFI's expectations for those institutions that are approved to use internal models for regulatory capital purposes and other institutions that use standardized models. This way, the applicability of the draft Guideline will be commensurate with the nature, size, complexity and risk profile of