Regulatory Alerts2025-09-11
Capital Adequacy Requirements (2026) – Chapter 5: Credit Risk Internal Ratings-Based Approach
The Office of the Superintendent of Financial Institutions (OSFI) requires federally regulated banks, holding companies, and trust and loan firms to implement the Internal Ratings-Based (IRB) approach for calculating credit risk capital. Institutions must classify exposures into designated asset classes and apply internal estimates for probability of default, loss given default, exposure at default, and effective maturity, contingent upon meeting OSFI’s minimum operational and governance standards. The framework defines asset-specific risk-weight functions, supervisory slotting rules for specialized lending, and mandatory disclosure protocols to standardize capital calculations across all eligible exposures.
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