To measure market risk, banks have implemented internal models for computing Value-at-Risk (VaR), which (subject to OSFI's approval) may be used for reporting regulatory market risk capital requirements. Models validation began in 1997 and, since then, model modifications by banks have become a frequent occurrence. OSFI anticipates that banks will continue to enhance/modify their internal models. Given that such modifications require approval, OSFI has drafted a guidance note to standardize the application process. The guidance note comes into effect immediately.

Institutions are invited to provide comments regarding the guidance note by June 29, 2001, through their industry association. Questions concerning the guidance note should be addressed to Dr. Dawei Li, Senior Quantitative Analyst, Capital Markets Division, at (416) 973-0602 or by fax at (416) 952-1663.

The guidance note is available in English and French on OSFI's Internet web site (http://www.osfi-bsif.gc.ca) under the Publications section. It can also be obtained by contacting Mr. Stéphane Dupel, General Services Division, by e-mail at extcomm@osfi-bsif.gc.ca or by facsimile at (613) 952-8219.