The Office of the Superintendent of Financial Institutions (OSFI) issued its quarterly release of regulatory changes on September 11, 2025, covering updates to the Capital Adequacy Requirements (CAR) Guideline, an expansion of scope for Guideline E-23: Model Risk Management, and the planned removal of mandatory peer reviews for insurers under Guideline E-15.
Capital Adequacy Requirements Guideline
The updates to the CAR Guideline aim to improve clarity and better reflect risks faced by banks and trust and loan companies.
OSFI notes that the revised CAR Guideline reflects several revisions in response to stakeholder comments submitted during its consultation held from February 20 to April 22, 2025. The changes include updates and clarifications related to the treatment of United States Government Sponsored Entities, how residential real estate exposures are treated as income-producing properties where repayment is materially dependent on cash flows, and the treatment of Combined Loan Products where multiple loans are secured by the same property. Revisions also include updates to the market risk capital rules to improve alignment with the credit risk capital treatment of sovereign exposures.
Guideline E-23: Model Risk Management
Model risk relates to the potential for adverse outcomes resulting from the design, development, implementation, or use of models.
Following a public consultation, the scope of Guideline E-23 has been expanded beyond risks from traditional models to also include risks from artificial intelligence (AI) and machine learning to better respond to current industry trends.
The updated guideline also introduces a principles-based framework that applies to all types of models, regardless of the technology used by an institution. It does not prohibit any specific modeling approaches, since OSFI aims to balance innovation with maintaining sound risk management practices.
- model definition and scope;
- proportionality;
- AI and machine learning;
- third-party vendors;
- model validation;
- data lineage; and
- model lifecycle.
The current Guideline E-23 only applies to deposit-taking institutions. When it comes into effect on May 1, 2027, the updated Guideline E-23 will apply to all federally regulated financial institutions, including insurers and foreign bank branches.
Guideline E-15: Appointed Actuary
As part of OSFI's efforts to reduce regulatory burden, it plans to make two major changes to Guideline E-15, including: (i) removing all content that unnecessarily repeats requirements that already exist in the Insurance Companies Act, and (ii) eliminating the requirement for peer review of an appointed actuary's work, since it believes the cost of peer review to the industry outweighs the prudential benefits.
The elimination of peer review of an appointed actuary's work will take effect on January 1, 2027.
Other Updates
OSFI published a report outlining key takeaways from the Standardized Climate Scenario Exercise (SCSE) conducted jointly by OSFI and the Autorité des marchés financiers (AMF).
A letter to the industry was shared, outlining key changes to OSFI's approach to administrative monetary penalties (AMPs), including (i) incorporating additional indicia for assessing the statutory penalty criteria, (ii) a lower tolerance for contraventions, such that penalties could be issued when OSFI determines lower levels of negligence and harm, and (iii) a revised scaling factor to determine appropriate AMP amounts for small and mid-sized financial institutions. The revised approach is effective for violations that occur after September 11, 2025.
- OFSI is postponing the release of the draft Corporate Governance and Accountability Guideline, to instead focus on board and senior management accountability, with a consultative document expected in January 2026;
- the Life Insurance Capital Adequacy Test Guideline revisions are being deferred to beyond 2028, and OFSI may reduce related capital requirements for domestic infrastructure debt and equity that meet certain criteria;
- OSFI plans to launch a consultation in January 2026 to streamline and clarify credit risk management guidance across key lending areas; and
- OSFI plans to reduce the scope or timing of some supervisory requests or reviews, while cancelling select data collections implemented during the pandemic.
Looking Forward
OSFI will hold an Industry Day on September 25, 2025, to give stakeholders further insight on the quarterly release items and the opportunity to ask related questions. Interested stakeholders may register here in advance.
Additional details on OSFI's policy work will be shared in its Semi-Annual Risk Outlook to be released on October 9, 2025.
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