EXPECTED REGULATORY DEVELOPMENTS COME INTO FRUITION IN JUNE
Date: July 12, 2022
Written by Paul Childerhose, Member of the Board
The month of June saw the Canadian federal government release Bill C-27, that includes several new proposed Acts, which if enacted into law will dramatically enhance the rights of individuals and the protection of their privacy and protection of their data. In addition, the Artificial Intelligence and Data Act (AIDA) is part of this major bill, and introduces requirements designed to protect Canadians from the harms and biased outputs that AI systems are capable of generating. Impact assessments are mandated and if an AI system is assessed as “high-impact”, there are further requirements, including public disclosure. Many of the applied uses for AI within financial institutions are bound to be considered as high impact. The Act will most certainly have a heavy influence in shaping OSFI’s planned consultation on Model Risk Management (E-23) that had been anticipated for this year but has now been pushed out to March 2023, with final guidance planned for publication by the end of 2023 and target implementation by June 2024.
One week after the introduction of Bill C-27, during the Collision Technology Conference in Toronto, Canada’s Minister of Innovation François-Philippe Champagne announced that the funding ($443MM) allocated in the 2021 budget for Phase-2 of the Pan-Canadian Artificial Intelligence Strategy will be focused on the commercialization and standardization of AI. Importantly, Phase-2 funding directs $8.6MM to the Standards Council of Canada “to advance the development and adoption of standards and a conformity assessment program related to AI.”
Another major development in June was the publication of ‘Principles for the Effective Management and Supervision of Climate-Related Financial Risks’ by the Basel Committee of Banking Supervisors (BCBS. The guideline sets out eighteen principles covering corporate governance, internal controls, risk assessment, management and reporting. Twelve of the principles are directed at the financial institutions and six are directed to the regulatory supervisors. No deadline was set for adherence, rather BCBS stated they expect implementation of the principles as soon as possible and will monitor progress across member jurisdictions. The international guidance falls on the heels of OSFI’s issuance of the B-15 Draft Guideline for the Management of Climate Risks by FRFI’s including mandatory climate-related financial disclosures which are aligned with the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD).
As a member or supporter of the Canadian RegTech Assoc., you may recall that when we set out at the beginning of the year, we announced four major themes for 2022; ESG and AI Governance were two of these. Regulatory developments this month will ensure these themes will continue to prevail for the remainder of this year and into 2023.