On January 29, 2026, OSFI announced the upcoming development of a comprehensive Credit Risk Management Guideline (CRM Guideline) for federally regulated financial institutions (FRFIs). In addition to modernizing OSFI’s guidance to enable agile responses to emerging credit risks and consolidating and clarifying existing credit risk-related expectations, one of the primary objectives of the CRM Guideline will be to strengthen credit risk management of all exposures at FRFIs by applying international best practices for lending, account and portfolio management and addressing areas where there may be gaps in existing regulatory guidance.
OSFI has consistently identified credit risk as a top risk facing FRFIs in Canada. Appropriately, OSFI has addressed the importance of managing credit risk in each of its most recent Annual Risk Outlooks (ARO). OSFI’s most recent ARO for Fiscal Year 2026-2027 identifies commercial real estate, wholesale credit, integrity and security, cyber, technology, third-party and artificial intelligence as “key risks.”
OSFI intends to publish chapters of the draft CRM Guideline for industry consultation during 2026 and 2027, which will address the overarching principles of sound credit risk management, wholesale credit risk management, non-bank financial intermediation (NBFI) risk management and real estate secured lending (RESL) risk management.
Overarching principles
The CRM Guideline will be developed having regard to the BIS Principles for the Management of Credit Risk (the BIS Principles) issued by the Basel Committee on Banking Supervision in April 2025. The BIS Principles are intended for use by banking supervisory authorities, and in particular, to promote sound practices for managing credit risk.
The BIS Principles address governance, regulatory compliance management, business risk and concentration risk. The following are examples of BIS Principles which may be relevant considerations or expectations for FRFIs in the CRM Guideline which is ultimately proposed by OSFI, notwithstanding the BIS Principles were expressly drafted in respect of banks.
- The board of directors should be responsible for reviewing and approving the institution’s credit risk strategy and significant credit risk policies. The credit risk strategy should reflect the institution’s tolerance for risk and the level of returns the institution expects to achieve, having regard to market conditions, macroeconomic factors and forward-looking information.
- Senior management is responsible for implementing the credit risk strategy and for developing policies and procedures for identifying, measuring, evaluating, monitoring, reporting and controlling or mitigating credit risk.
- Institutions should operate within sound, well-defined credit-granting criteria. Criteria include a thorough understanding of counterparty/borrower risk profile and characteristics, as well as credit purpose and structure and source of repayment.
- Institutions may be encouraged to develop and utilize an internal risk rating system in managing credit risk. The rating system should be consistent with the nature, size and complexity of the institution’s activities.
- Credit limits are established at the level of individual borrowers and counterparties, and groups of connected counterparties. In the Canadian regulatory landscape, we have observed increased guidance in respect of concentration risk which relates to both banks and insurer business and investments.
- Institutions may be expected to take into consideration current and forward-looking market and macroeconomic factors when assessing individual credits and their credit portfolios, and to assess their credit risk exposures under stressful conditions.
- Institutions may be expected to have information systems and analytical techniques that enable management to measure the credit risk inherent in all on- and off-balance sheet activities. The management information system should provide adequate information on the composition of the credit portfolio, including identification of any concentrations of risk.
Wholesale credit risk
Wholesale credit risk remains a key priority for OSFI due to “large exposure sizes, sensitivity to economic cycles, and the inherent complexity of individual exposures.” Wholesale credit is broadly defined and includes facilities provided to other institutions, loans to corporations, partnerships and proprietorships and loans secured by commercial real estate.
In its ARO for 2026-2027, OSFI indicated that it expects to maintain quarterly monitoring and continued dialogue with institutions on wholesale credit risks, particularly with respect to vulnerabilities affecting commercial real estate and corporate and commercial clients.
OSFI will clarify its expectations for the sound management of wholesale credit risks, incorporating the 2024 Revised Commercial Real Estate Regulatory Notice, and addressing all other wholesale credit exposures.
Non-bank financial intermediation risk management
The Financial Stability Board (FSB) recently released recommendations for regulators to identify and address financial stability risks arising from NBFIs in a Report entitled Leverage in Nonbank Financial Intermediation dated July 2025 (the FSB Report). The FSB Report notes that, between 2015 and 2025, the NBFI sector grew to almost half of global financial assets, with business models and strategies often using leverage. That leverage, if not properly managed, may create vulnerability and strain throughout the financial system, which can negatively impact financial stability.
The FSB Report includes recommendations for regulatory authorities relating to identification and monitoring of financial stability risks created by NBFI leverage, as well as the selection, design and calibration of policy measures to address such risks in a flexible, targeted and proportionate manner. The recommendations include an endorsement for the BCBS Guideline on Counterparty Credit Risk Management (the BCBS Standards).
OSFI has indicated that it intends to incorporate the FSB Report and the BCBS Standards throughout the CRM Guideline to help institutions manage credit risk related to NBFIs and other counterparties.
Real estate secured lending risk
According to OSFI, RESL represents the largest class of credit exposures for institutions in Canada. OSFI’s most recent ARO states that, as of January 2026, 52% of total mortgages in Canada will be renewing by the end of 2027 and that, of these renewals, there are 1.3 million fixed-rate mortgages or variable-rate mortgages with fixed payments which will be renewing for the first time since they were originated during the low mortgage rate period of 2021 and 2022. This raises concerns in respect of the ability of mortgagors to service increased borrowing costs, particularly in the face of a decrease in house prices since late 2022.
OSFI intends to consolidate all RESL-related expectations into one chapter of the CRM Guideline, which will include Guideline B-20 – Residential Mortgage Underwriting Practices and Procedures (2017); Advisory – Clarification on the Treatment of Innovative Real Estate Secured Lending Products under Guideline B-20 (2022); and Regulatory Notice – Reinforcing Residential Mortgage Risk Management Practices (2024). OSFI has indicated that it would seek to minimize potential operational impacts, acknowledging that Guideline B-20 underpins the internal mortgage underwriting policies at FRFIs.
Conclusion
In anticipation of the CRM Guideline, FRFIs should consider the efficacy of their existing governance processes, credit risk strategy and credit risk management policies and procedures. In addition, FRFIs should assess their exposure to wholesale credit, NBFIs and RESL.
OSFI is accepting submissions from industry stakeholders on the framework for the proposed CRM Guideline by e-mail at creditrisk-risquedecredit@osfi-bsif.gc.ca until July 29, 2026.
Dentons Canada’s Corporate and Regulatory Insurance team helps financial institutions anticipate regulatory and compliance issues that are forthcoming. If you would like assistance preparing your submission in response to OSFI’s announcement, please reach out to Marisa Coggin or any member of the Corporate and Regulatory Insurance team.
