The new guideline:
- Enhances expectations for operational risk management.
- Sets new expectations for operational resilience, a vital component of OSFI’s supervisory framework.
- Sets new expectations for business continuity risk management, crisis management, change management, and data risk management, which strengthen operational resilience.
While its annual report acknowledged opportunities ahead, such as the higher rate benefits for pension fund investment income and decreasing future liabilities, it also highlighted that “changing institution and consumer behaviour could have unexpected effects on actuarial experience, policy design, risk modelling, and other institutional decisions.”
Household debt
Rising Canadian household debt was also noted in the annual report as a risk with mortgage payments taking a larger chunk of household income and if the labour market weakens “the effects on credit quality could be material, and the landscape could change dramatically.”
With 76% of mortgages outstanding as of February 2024 due for renewal by the end of 2026, OSFI says Canadian homeowners could be in for a payment shock, especially if they took out their home loan when interest rates were lower between 2020 and 2022.
“We expect payment increases to lead to a higher incidence of residential mortgage loans falling into arrears or defaults,” the report states.
