What Does Operational Risk Management Draft Guideline Mean For Federally Regulated Financial Institutions?

On August 20, 2015, the Office of the Superintendent of Financial Institutions (OSFI) released Draft Guideline E-21: Operational Risk Management (Draft Guideline) for comments. With the Draft Guideline, OSFI aims to provide a "comprehensive view of operational risk management and related OSFI guidance, across all FRFIs" and fill what it perceives to be a gap in existing guidance.

Pursuant to the Draft Guideline, all federally regulated financial institutions (FRFIs), other than branch operations of foreign banks and foreign insurance companies, would be expected to establish and maintain an enterprise-wide framework of operational risk management controls. The FRFIs' approach to operational risk management is to be informed by four "guiding principles" set out in the Draft Guideline. Although the Draft Guideline makes some distinction between small and large FRFIs, if the Draft Guideline becomes effective in its current form it will impose a significant additional