Federal financial regulators are proposing governance and internal control requirements for banks that participate in the setting of the financial benchmark known as the Canadian Dealer Offered Rate (CDOR).

The Office of the Superintendent of Financial Institutions (OSFI) Friday issued a draft guideline for banks’ CDOR submissions that are used to set the benchmark. It outlines OSFI’s expectations for the governance and internal controls surrounding the rate submission processes.

Regulators around the world have been examining financial benchmarks and how they are calculated in the wake of the LIBOR scandal, which revealed that firms were gaming the process in order to influence their own trading positions. While there’s been no evidence of similar manipulation taking place with CDOR, regulators are nevertheless looking at ways to ensure the integrity of the benchmark setting process.

“Strong governance and internal controls help maintain confidence in CDOR as a robust interest rate benchmark in Canada,” notes OSFI in today’s proposals.

The proposed guidance requires that senior management be responsible for developing and implementing a governance and control framework that is subject to board oversight. It also sets out its expectations to ensure the oversight of this process is independent of operational management. “This includes maintaining sufficiently robust systems to identify, assess, monitor, and report all relevant risks in its benchmark submission activities,” it says.

It also requires that internal controls and procedures covering the CDOR submission process, including submission methodology, should be clearly documented, reviewed at least annually, and updated as necessary. And, that banks provide adequate training on a clear and effective conflict of interest policy that applies to all employees involved in submission activities. And it sets expectations for internal audit procedures.

Comments on the draft guideline are due by July 11.