TLDR: The Office of the Superintendent of Financial Institutions (OSFI) has released its foundational ‘EDGE’ principles—Explainability, Data, Governance, and Ethics—for the responsible deployment of Artificial Intelligence (AI) in Canada’s financial sector. These principles, emerging from the second Financial Industry Forum on Artificial Intelligence (FIFAI II) held on July 9, 2025, aim to guide financial institutions in harnessing AI’s transformative potential while rigorously managing associated risks, with full compliance expected by July 1, 2025, under the revised Guideline E-23.
Ottawa, Canada – July 9, 2025 – The Office of the Superintendent of Financial Institutions (OSFI) today announced a significant step towards integrating Artificial Intelligence (AI) safely and effectively into Canada’s financial landscape with the unveiling of its ‘EDGE’ principles for responsible AI. This initiative follows the second Financial Industry Forum on Artificial Intelligence (FIFAI II), a collaborative effort with the Global Risk Institute (GRI), which convened leaders from finance, government, and academia to address the opportunities and challenges presented by AI.
At the core of OSFI’s framework are the four guiding ‘EDGE’ principles: Explainability, Data, Governance, and Ethics. These principles are designed to provide a structured approach for financial institutions to manage the inherent risks of AI while unlocking its transformative potential. Explainability emphasizes the critical need for AI decisions to be understandable to both internal and external stakeholders, fostering trust while balancing confidentiality requirements. The Data principle underscores the necessity of reliable and well-governed data, highlighting the importance of data quality, consent, privacy, and robust employee training to mitigate associated risks. Strong Governance frameworks are deemed essential for overseeing AI implementation across the entire enterprise, requiring adaptability and multi-disciplinary expertise. Finally, ethical considerations, including transparency, privacy, consent, and the mitigation of algorithmic bias, must be central to AI deployment, rooted in the institution’s business culture and societal values.
The forum identified a range of risks that financial institutions must navigate. Internal risks include poor data governance, the use of opaque or overly complex models, potential legal and reputational vulnerabilities, excessive reliance on third-party AI vendors, cybersecurity threats, and exposure to market and credit risks through automated decision-making. Externally, the rising sophistication of cyber threats, amplified by generative AI through deepfakes and phishing, poses a significant concern. Additionally, competitive pressures could incentivize rapid AI adoption without adequate safeguards, increasing systemic risk.
OSFI is urging all regulated entities to proactively integrate these principles into their AI strategies, ensuring both innovation and responsible governance. This move builds upon previous regulatory and policy milestones, including OSFI’s AI and Quantum Questionnaire conducted in December 2023 and a joint AI Risk Report with the Financial Consumer Agency of Canada (FCAC) released in September 2024.
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Looking ahead, OSFI is advancing towards a more formal regulatory approach. The revised draft Guideline E-23 now explicitly addresses AI and machine learning risks, with full compliance expected by July 1, 2025. The regulator is committed to working closely with other agencies, including FCAC and Innovation, Science and Economic Development Canada, to align financial-sector oversight with broader federal AI legislation, such as the Artificial Intelligence and Data Act (AIDA). The forum underscored that as AI becomes more deeply embedded in the financial sector, institutions must approach its deployment with a high degree of caution and accountability, with OSFI affirming its commitment to ongoing collaboration with various industry stakeholders, domestic and international peers, academia, and the private sector to develop further AI guidance.
