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against Priorities

OSFI identified five priorities for 2015-2016 through which to achieve its mandate. This section reports key accomplishments under each of those priorities. OSFI achieved its goals for the reporting year and continues to work on these multi-year priorities. More details are available in subsequent chapters of this report.

PRIORITY A – Anticipating and Responding to Risks

Steps Taken

  • OSFI conducted a standardized stress test on reinsurance related risks, and, with the Bank of Canada, OSFI also conducted a macro stress test with domestic systemically important banks (D-SIBs) that explored severe but plausible scenarios and associated system impacts.
  • Examined issues of interconnection between regulated entities and the shadow banking sector in order to better understand the role of shadow banking in the marketplace and how this may translate into prudential concerns for the Canadian financial system at large.
  • Issued a draft Operational Risk Management guideline for public consultation in August 2015. After reviewing industry comments and incorporating appropriate revisions, OSFI will issue the final version of the guideline in 2016.
  • Conducted a cross-system review of compensation practices and determined that the Domestic Systemically Important Banks’ (D-SIBs) compensation practices are generally aligned with regulatory expectations.
  • Actively monitored regulated entities’ progress in the development of their cyber security programs.

PRIORITY B – Enhancing Supervisory Processes

Steps Taken

  • Embarked on a project to review our supervisory processes tools and related technologies.
  • Established a Small and Mid-Size (SMS) advisory program to review the application of guidelines and methodology, to ensure that OSFI’s expectations continue to be risk-based and scaled to the size and complexity of small and mid-sized institutions.
  • Worked to develop an OSFI Risk Tolerance Framework to assist in prioritizing supervisory work across OSFI.

PRIORITY C – Completing the Post-Crisis Reform Agenda        

Steps Taken

  • OSFI, in partnership with AMF and Assuris and in consultation with industry, worked to develop a more advanced risk-based capital approach for life insurers. The review included available capital, credit, market, insurance, and operational risks as well as credits for risk mitigation and diversification. A draft guideline, the Life Insurance Capital Adequacy Test (LICAT), was released in March 2016 for public consultation.
  • Introduced a significantly revised version of the Minimum Capital Test for Property and Casualty insurers for implementation in 2015, and introduced a number of smaller amendments in 2016 related to capital requirements for equity derivatives and recognition of eligible equity hedging strategies.
  • Issued the final version of the guideline on Margin Requirements for Non-centrally Cleared Derivatives. This guideline applies only to federally regulated financial institutions that meet minimum requirements for outstanding notional values of non-centrally cleared derivatives.
  • Developed a new model for determining capital requirements for mortgage insurance risk and have been discussing calibration of the new model with the private mortgage insurers and Canada Mortgage Housing Corporation (CMHC). The new approach with final calibration will be described in an advisory and implemented in 2017.
  • Issued draft guidelines outlining OSFI’s expectations for regulated entities regarding the application of IFRS 9 Financial Instruments and Disclosures, and for deposit-taking institutions regarding the revised Pillar 3 Disclosure Requirements.

PRIORITY D – Maintaining a High-Performing Workforce

Steps Taken

  • Implemented a new, more robust intranet site with increased functionality. This intranet update provides the space and capacity to ensure all employees are kept up-to-date on the latest internal initiatives, while at the same time informing employees of regulatory activities being implemented externally.
  • Introduced webcast town halls to simultaneously communicate with all OSFI staff and to enhance communication with staff across all OSFI offices.
  • Worked on the development of a modular training program to establish core and specialized learning for OSFI employees.
  • Adopted a structured approach to managing IT investment outcomes with a focus on accountability for results to ensure that projects do not only meet their scope, schedule and budget targets, but that they also achieve value for money and realize expected benefits for OSFI.

PRIORITY E – Enhancing OSFI’s Corporate Infrastructure

Steps Taken

  • Commenced phased migrations into OSFI’s new document and records management system.
  • Continued the development and implementation of enterprise information management policy instruments and guidance to better enable OSFI employees in utilizing and sharing information assets.
  • Developed a cyber-security strategy and action plan.

The above five priorities will also guide the achievement of strategic outcomes for 2016-2017. Details can be found in the Reports and Accountability section of OSFI's website.