Table of Contents
The Office of the Superintendent of Financial Institutions (OSFI) is an independent federal government agency that regulates and supervises some 400 federally regulated financial institutions and 1,200 pension plans to determine whether they are in sound financial condition and meeting their requirements.
Fostering sound risk management and governance practices
- OSFI advances a regulatory framework designed to control and manage risk.
Supervision and early intervention
- OSFI supervises federally regulated financial institutions and pension plans to determine whether they are in sound financial condition and meeting regulatory and supervisory requirements.
- OSFI promptly advises financial institutions and pension plans if there are material deficiencies, and takes corrective measures or requires that they be taken to expeditiously address the situation.
Environmental scanning linked to safety and soundness of financial institutions
- OSFI monitors and evaluates system-wide or sectoral developments that may have a negative impact on the financial condition of federally regulated financial institutions.
Taking a balanced approach
- OSFI acts to protect the rights and interests of depositors, policyholders, financial institution creditors and pension plan beneficiaries while having due regard for the need to allow financial institutions to compete effectively and take reasonable risks.
In fulfilling its mandate, OSFI supports the government’s objective of contributing to public confidence in the Canadian financial system.
Accountability and Governance
Various formal and informal processes enable OSFI to execute its mandate. For example, the Financial Institutions Supervisory Committee, which the Superintendent chairs, meets on a quarterly basis to facilitate the exchange of information relating to the supervision of federally regulated financial institutions. Members include OSFI, the Department of Finance, the Bank of Canada, the Canada Deposit Insurance Corporation and the Financial Consumer Agency of Canada. While the Department of Finance reports directly to the minister, OSFI and the others are arm’s-length agencies or Crown corporations, reporting to Parliament through the minister.
OSFI's accountability framework includes:
- issuing an annual report and departmental plan
- submitting financial statements and related control processes to an annual external audit
- an external audit committee and internal audit group and audit reports
- conflict of interest and code of ethics policies
- consultations with the following before new rules are finalized:
- financial institutions/industry
- other relevant government agencies
- subject matter experts
- appearing before Parliamentary committees to provide information on:
- topics of interest
- OSFI’s annual report and departmental plan
- important assessments
- conducting confidential surveys and consultations with key stakeholders to assess OSFI’s performance as a supervisor and regulator of federally regulated financial institutions
- participating in reviews to determine whether OSFI is meeting internationally established standards for prudential regulators.
OSFI was established in 1987 by an Act of Parliament: the Office of the Superintendent of Financial Institutions Act (OSFI Act).
OSFI derives its powers from, and is responsible for administering, the following legislation:
- Bank Act
- Trust and Loan Companies Act
- Cooperative Credit Associations Act
- Insurance Companies Act
- Pension Benefits Standards Act, 1985, and
- all related regulations
These acts and regulations set out the rules for the structure and operation of federally regulated financial institutions and the standards for federally regulated private pension plans. The various acts address the unique aspects of the sectors each governs, and are designed to be consistent with each other.
OSFI reports to Parliament through the minister of Finance. Although the minister of Finance is responsible for OSFI, the Superintendent is solely responsible for exercising the authorities provided by the financial and pension legislation, and must report to the minister from time to time on the administration of legislation governing financial institutions and pension plans.
Who OSFI regulates and supervises
OSFI regulates and supervises some 400 financial institutions and some 1200 pension plans in Canada, including the following:
- banks, including:
- domestic banks
- foreign banks
- full-service foreign bank branches, and
- foreign bank branches that provide only lending services
- trust companies
- loan companies
- cooperative credit associations
- cooperative retail associations
- life insurance companies
- fraternal benefit societies
- property and casualty insurance companies
- mortgage insurance companies
Private pension plans:
- federally regulated private pension plans organized and administered primarily for the benefit of employees and former employees of organizations under federal jurisdiction, such as banking, inter-provincial transportation and telecommunications.
For a full list of institutions and pension plans, visit: Who We Regulate.
How OSFI regulates and supervises
OSFI regulates by developing rules, interpreting legislation and regulations and providing regulatory approvals for certain types of transactions. It also contributes to new accounting, auditing and actuarial standards. All of this must balance the goals of safety and soundness with the need for institutions to operate within a competitive marketplace.
OSFI supervises by analyzing financial and economic trends to identify emerging issues that could adversely affect institutions. It assesses an institution’s financial condition, material risks and the quality of its governance, risk management and compliance. When weaknesses are identified, OSFI intervenes early and works with executive management, boards and pension plan administrators to correct matters.
OSFI’s scope of regulation and supervision does not include consumer-related or market conduct issues, nor the investment/securities sector. These are the responsibility of other regulatory bodies or agencies, both federal and provincial.
OSFI works closely with its federal financial regulatory partners, including the Department of Finance, the Bank of Canada, the Canada Deposit Insurance Corporation and the Financial Consumer Agency of Canada. Together, these agencies collaborate regularly to share information on matters relating to the supervision of federally regulated financial institutions. These partners also meet to discuss financial sector policy issues.
OSFI also works with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), which is responsible for ensuring compliance with Canada’s Proceeds of Crime (money laundering) and Terrorist financing Act.
Collaboration and consultations with provincial counterparts and industry in Canada and abroad are a regular occurrence and help OSFI to understand and resolve potential issues.
International organizations such as the Financial Stability Board, the Basel Committee on Banking Supervision and the International Association of Insurance Supervisors play a key role in the development of regulatory frameworks for banks and insurers that contribute to a strong and stable global financial system. OSFI has earned a strong international reputation through its active participation in such international organizations, which allow it to share Canadian perspectives and help shape international rule setting.
OSFI employs some 700 people in offices located in Ottawa, Montreal, Toronto and Vancouver. It is organized into four main sectors:
- Deposit-taking Supervision
- Insurance Supervision
- Corporate Services
Regulation enhances the safety and soundness of the financial system through the evaluation of system-wide risks, and through the promotion of sound business and financial practices by providing guidelines, policy and recommendations.
Regulation involves the following activities:
- contributing to the development of legislation and regulations, and interpreting them;
- issuing guidelines, advisories and rulings;
- approving regulatory requests from federally regulated institutions; and
- ensuring compliance of federal pension plans with the legislation.
Structure of the Regulation Sector
Accounting Policy: Develop strategy and policy related to internal, national and international accounting policy and financial reporting; contribute to the development and effective implementation of sound accounting and assurance standards to meet regulatory needs.
Capital: Develop capital standards for domestic financial institutions; contribute to the development of sound international capital standards; and approve capital precedents.
Legal Services: Provide or obtain all legal advice and legal services required.
Legislation and Approvals: Contribute to the development of legislation, regulations and guidance that maintain or strengthen public confidence in Canada’s federally regulated financial sector; prepare recommendations related to applications made by financial institutions for regulatory consent; and assess compliance by financial institutions with their governing legislation.
Research: Identify emerging international issues that may be relevant to OSFI; and provide ongoing research support for projects.
Private Pension Plans: Supervise private pension plans covering employees in federally regulated areas of employment such as banking, inter-provincial transportation and telecommunications. When problems are identified, promptly advise the administrator of a plan and work with them to ensure corrective measures are taken. Provide regulatory approvals to plans for certain types of transactions and promote responsible plan administration and governance. OSFI also takes into account the risk implications for plans, including developments affecting actuarial and accounting standards, innovative new investment products and strategies to optimize returns and match pension liabilities.
Supervision involves assessing the safety and soundness of federally regulated financial institutions, and using supervisory powers to intervene in a timely manner when necessary to protect the rights and interests of depositors and policyholders.
OSFI supervises in accordance with its Supervisory Framework and Supervisory Framework Rating Assessment Criteria. Key activities include:
- developing and executing a risk-based supervisory plan for each institution that includes examining and monitoring its financial condition and the effectiveness of its internal oversight and control functions;
- making recommendations to financial institutions and taking other intervention actions when irregularities are found;
- following up on the corrective actions undertaken by those institutions; and
- analyzing risks and identifying trends within the financial sector.
Structure of the Supervision Sectors
Deposit-Taking Supervision: Supervise federally regulated deposit-taking financial institutions (including branches and foreign subsidiaries) and their subsidiaries.
Insurance Supervision: Supervise federally regulated life insurance companies (including branches, foreign subsidiaries, fraternal and mutual companies) and their subsidiaries; federally regulated property and casualty insurance companies (including branches, foreign subsidiaries, and mutual companies) and their subsidiaries; and mortgage insurance companies.
Supervision Support Group: Provide expertise in risk management and cross-sector risk analytics and intelligence to the other supervisory units, and provide OSFI-wide support for emerging risk analysis, aggregation and reporting.
Common Supervisory Services: Provide technology and tools, training, methods, and ensure consistency.
Actuarial: Ensure appropriate actuarial knowledge, advice and standards are applied to OSFI's regulatory and supervisory functions.
OSFI Corporate Services Sector
Corporate Services Sector provides support services to the organization to allow it to perform its functions in an efficient and cost-effective manner.
Structure of the Corporate Services Sector
Communications and Consultations Division: Provide internal and external communications, public relations, linguistic services, event management and conduct surveys and consultations.
Finance and Corporate Planning Division: Provide accounting and financial services, procurement and contracting services, and corporate planning.
Human Resources and Administration Division: Provide policy, guidance and oversight necessary to facilitate a safe, secure, comfortable and productive workplace, while ensuring employees with the required skills are in place to meet OSFI’s business plan and priorities.
Information Management and Information Technology Division: Provide information management and technology services and solutions.
Data Management Division: Provide guidance and technical expertise to achieve effective management of regulated entity and pension data.
Office of the Chief Actuary
The Office of the Chief Actuary (OCA) is an independent unit within OSFI that provides a range of actuarial services to the Government of Canada in the form of reports tabled in Parliament and actuarial advice to various government departments.
The OCA conducts statutory actuarial valuations of the Canada Pension Plan (CPP), the Old Age Security (OAS) program, the Canada Student Loans Program (CSLP), and federal public sector employee pension and insurance plans. These valuations estimate the financial status of these plans and programs as required by legislation. The OCA submits reports to the ministers of Finance and Families, Children and Social Development, and the president of the Treasury Board.
The OCA also provides the relevant government departments, including the executive arm of provincial and territorial governments, who are co-stewards of the CPP, with actuarial advice on the design, funding and administration of these plans. OCA clients include Employment and Social Development Canada, the Department of Finance Canada, the Treasury Board Secretariat, Public Services and Procurement Canada, National Defence and the Canadian Armed Forces, Veterans Affairs Canada, the RCMP and the Department of Justice Canada.
The Chief Actuary reports to the Superintendent, but is solely responsible for the content and actuarial opinions contained in OCA reports, and for actuarial advice provided to relevant government departments, including the executive arm of provincial and territorial governments, which are co-stewards of the CPP.
Structure of the OCA
Social Insurance Programs: Assist the Chief Actuary in providing to the minister of Finance or the minister of Families, Children and Social Development, statutory actuarial reports showing the costs, liabilities and long-term financial projections for the CPP, OAS and the CSLP respectively. Other non-statutory actuarial services include actuarial estimates of costs and liabilities and long-term financial projections of any changes to these programs being considered by governments.
Public Sector Insurance and Pension Programs: Assist the Chief Actuary in providing to the president of Treasury Board or the minister of Finance, statutory actuarial reports on the costs, liabilities and long term financial projections in respect of several insurance and pension programs covering the federal public service, the Canadian Armed Forces, the RCMP, federally appointed judges and members of Parliament. This section is also involved in providing actuarial advice and costing to assist various government departments in the design, funding and administration of these programs.