Fall 2017

Final version of residential mortgage underwriting guideline published

On October 17, 2017, OSFI published the final version of its Residential Mortgage Underwriting Practices and Procedures Guideline (B-20).

The guideline sets out OSFI’s expectations for prudent residential mortgage underwriting, and is applicable to federally regulated financial institutions that are engaged in residential mortgage underwriting and the purchase of residential mortgage loan assets – in Canada and internationally.

The changes to the final guideline focus on the minimum qualifying rate for uninsured mortgages, expectations around loan-to-value (LTV) frameworks and limits, and restrictions to transactions designed to circumvent those LTV limits.

When addressing the Economic Club of Canada, Superintendent Jeremy Rudin stated that OSFI is keenly aware of “the potential risks caused by high household indebtedness across Canada, and by high real estate prices in some markets.”

“We are not waiting to see those risks crystalize in rising arrears and defaults before we act. Rather, we are adapting our standards to new developments,” added Superintendent Rudin. “To implement our balanced mandate, we need to ensure that the expectations that we set for financial institutions are principles-based and scaled to the size and complexity of the institutions we supervise, wherever possible.”

View the news release.

OSFI at 30: Learning from the past; looking to the future − remarks by Superintendent Jeremy Rudin

On October 3, 2017, Superintendent Jeremy Rudin delivered remarks to the Economic Club of Canada in Toronto on OSFI's past, present and future. Following are some key excerpts:   

The financial services sector plays a critical role in our national life. Financial institutions help power our economy and so contribute to our collective prosperity. When our financial institutions are sound, efficient and competitive, we all benefit.
 
Proactive and expert regulation and supervision of financial institutions are essential to securing those benefits for all Canadians.

That is why the Government of Canada created OSFI in 1987.

So today, I am going to share with you a very selective history of OSFI’s first thirty years. In particular, I will describe what I see as the four most important chapters in OSFI’s history, underlining how each of those episodes had a positive impact on how OSFI performed in the past, and how we will perform in the future.

They are:

1. Our proactive approach to regulation and supervision, which arose from the events that led to the creation of OSFI in 1987;
2. Our balanced mandate, which we were given in the mid-1990s;
3. Our disciplined approach to confidential information, which received crucial reinforcement in the early 2000s; and
4. Our constant battle against complacency, best exemplified by our reaction to the 2008 Global Financial Crisis.

View the full remarks. 

Appointment of Assistant Superintendent, Risk Support Sector

On July 25, 2017, Superintendent Jeremy Rudin announced the appointment of Ben Gully to the recently created position of Assistant Superintendent, Risk Support Sector.

In this role, Mr. Gully oversees risk assessment in credit, market and operational risks; corporate governance; risk surveillance and analytics; model validation and approvals; anti-money laundering; and regulatory compliance.

Mr. Gully comes to OSFI from the Australian Prudential Regulation Authority (APRA) where he served as Chief Risk Officer. Before joining APRA, he worked at OSFI, serving in a number of specialist, regulation and supervision roles, most recently as the Senior Director of domestic systemically important banks (D-SIBs). Mr. Gully began his career at the Bank of England.

View the announcement. 

Assistant Superintendent Neville Henderson addresses National Insurance Conference of Canada

On October 2, 2017, Neville Henderson, Assistant Superintendent, Insurance Supervision Sector, spoke to 450 property and casualty (P&C) insurance professionals at the annual National Insurance Conference of Canada in Québec City.

During the fireside chat, Mr. Henderson spoke about the changing environment for P&C insurers, both domestically and internationally.

In particular, he spoke to several issues facing the industry, including technological changes, autonomous vehicles and the effects and consequences of catastrophic events on the insurance and reinsurance industries.

View a summary of the remarks.

Draft revisions to Capital Adequacy Requirements (CAR) Guideline

On August 21, 2017, OSFI released for consultation revisions to the CAR guideline for implementation in the first quarter of 2018. The revisions mainly relate to the treatment of allowances as a result of the expected adoption of IFRS 9 by deposit-taking institutions in 2018.

A non-attributed summary of industry comments received, along with OSFI’s responses, will be posted on our website when the final version of the guideline is released. The comment period closed at the end of September.

View the revised guideline.

Revisions to the Corporate Governance Guideline published for consultation

On November 7, 2017, OSFI issued draft changes to its Corporate Governance Guideline for public consultation. OSFI’s corporate governance guidance sets out expectations for boards of federally regulated financial institutions (FRFIs).

OSFI first announced its intention to review the expectations for FRFI boards in June of last year. The review is intended to ensure that OSFI’s guidance continues to reflect evolving governance standards and enables boards to focus on key risks and execute their oversight roles efficiently.   

View the news release.

2018 Minimum Capital (MCT) Test Guideline

On October 19, 2017, OSFI released updates to the MCT guideline, which sets out capital requirements for federally regulated property and casualty insurers. The revisions follow an annual review, including a consultation period that closed in early August .

This year’s amendments to the guideline are not substantive. They remove transition requirements that are no longer applicable and provide clarification to a number of provisions where OSFI has received multiple industry inquiries over the past year. 

View the news release.

 

Final version of Enterprise-wide Model Risk Management Guideline

On September 13, 2017, OSFI released the final version of its Enterprise-wide Model Risk Management Guideline. The guideline has been revised to reflect comments received during the consultation period, which ended in late February.

Deposit-taking institutions are increasingly relying on models for regulatory capital determination, as well as for valuation and business decision-making purposes. Guideline E-23 provides institutions with comprehensive and clear guidance and common standards for enterprise-wide model risk management.

View the news release. 

OSFI 2016-2017 Annual Report

On October 6, 2017, OSFI’s annual report for 2016-2017 was tabled in Parliament. The report is a key component of OSFI's accountability framework and provides a summary of OSFI’s performance against annual priorities and achievements.

2016-2017 was another year of continuing low interest rates, growing levels of household debt andSeptember 27, 2017 stubbornly slow economic growth. OSFI undertook a number of activities to address developing risks in these areas, and others, to further strengthen Canada’s system of prudential regulation and supervision.

View the Annual Report.   

Updates from the Office of the Chief Actuary (OCA)

On October 18, 2017, Chief Actuary Jean-Claude Ménard presented to the Society of Actuaries (SOA) Annual Meeting & Exhibit, in Boston, Massachusetts, on the Canada Pension Plan and its progression between 1997 and 2016.

On October 12, 2017, the OCA published a fact sheet entitled Registered Pension Plans (RPP) and Other Types of Savings Plans – Coverage in Canada.

The Actuarial Report on the Canada Student Loans Program was posted on our site on September 27, 2017.

On September 14, 2017, the 2018 Actuarial Report on the Employment Insurance Premium Rate was posted on our site and tabled before Parliament on Sept 27 2017.

The Actuarial Report on the Old Age Security Program as at 31 December 2015 was tabled before Parliament on August 16, 2017.

View updates from the Office of the Chief Actuary.

 

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The OSFI Pillar is published by the Communications Division of the Office of the Superintendent of Financial Institutions Canada.

For more information on the articles in this issue, or to provide feedback, please e-mail OSFI Communications at: communications@osfi-bsif.gc.ca.

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