Summary of remarks by Jamey Hubbs to the Global Risk Institute

On May 13, Jamey Hubbs, Assistant Superintendent, Deposit-Taking Supervision Sector was interviewed by Sonia Baxendale, President and CEO of the Global Risk Institute as part of a webinar hosted by the Institute.

Mr. Hubbs said that Canadians can have confidence in the financial system. "While the Canadian financial system was sound during the last global financial crisis, OSFI has used the past decade to enhance the resilience of individual firms and the financial system more broadly." He noted that since March, OSFI has been in regular contact with industry, outlining regulatory adjustments and posting letters and Frequently Asked Questions on its website so that stakeholders know the actions OSFI has taken and the reasons for them.

Mr. Hubbs outlined OSFI's regulatory and supervisory adjustments that fall into two broad categories:

  • Adjustments that reflect the current situation and that better align the intention of the regulation or guidance with the current situation; and
  • Adjustments that align regulations and guidance with newly announced government programs.

"Canada entered this pandemic with a robust regulatory regime," he said. Early on, OSFI established a set of criteria by which to assess every potential regulatory decision. Any changes must be:

  • credible – measures are transparent, preserve the integrity of the regulatory framework and are within international standards
  • consistent – measures can be applied in the same way to all comparable institutions
  • necessary – adjustments are not made unless other reasonable alternatives could not or should not be used
  • fit-for-purpose – changes should make capital and liquidity measurements more accurate, avoid obscuring the situation and be phased out when no longer warranted

Mr. Hubbs said that although we have experienced stressed periods before, such as oil shocks, those shocks originated in the real economy and moved to the financial sector. The current situation is different in that it is a health event. What is somewhat similar is the response by central banks and governments with various programs and strategies to support the economy and financial sector through market disruptions. Mr. Hubbs also noted that, in many ways, the response has been different. Some of these programs are unprecedented and introduce new risks such as those that may arise from deferred payments. There are also operational risks given the distributed work force at nearly all organizations.

Mr. Hubbs relayed that OSFI is encouraged by the operational resilience of institutions and the system more broadly. Funds continue to flow, payments are completed and trades are settled. In addition, He outlined measures OSFI has taken since March to boost the resiliency of financial institutions and the industry, including the release of capital and liquidity buffers; restrictions on dividend increases and share buybacks; treatment of payment deferrals; higher covered bond limits; enhanced reporting and supervisory monitoring; delaying the full Basel III implementation; and adjusting leverage ratios. These actions are measured and deliberate to maximize resiliency.

When asked for advice on what other organizations can learn from OSFI's business continuity plans and remote working, Mr. Hubbs said the best advice is to have employees that have the skills, professionalism and commitment to getting the job done right.

As to the future and next steps in regulation, he noted that will depend on any risks that materialize. OSFI has made the bulk of the adjustments needed but will continue to closely monitor risks and make adjustments when necessary, and ensure any new regulations meet the new criteria of being credible, consistent, necessary and fit-for-purpose.

Quote

"Canadians can have confidence in the financial system. While the Canadian financial system was sound during the last global financial crisis, OSFI has used the past decade to enhance the resilience of individual firms and the financial system more broadly."

About OSFI

The Office of the Superintendent of Financial Institution (OSFI) is an independent agency of the Government of Canada, established in 1987, to protect depositors, policyholders, financial institution creditors and pension plan members, while allowing financial institutions to compete and take reasonable risks.

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