Office of the Superintendent of Financial Institutions
OSFI's legislated mandate was implemented in 1996 and under the legislation, OSFI’s
mandate is to:
OSFI’s legislation acknowledges the need to allow institutions to compete effectively
and take reasonable risks. It also recognizes that management, boards of directors and
plan administrators are ultimately responsible and that financial institutions and
pension plans can fail.
OSFI’s Long-Term Priority remains unchanged for the 2013-2016 planning period and is
to be proactive in anticipating and addressing risks from economic uncertainty and
regulatory change. Drivers of this priority include business and regulatory change
arising from, the interaction between, and unintended consequences of, events such
To achieve its Long-Term Priority, OSFI recognizes that:
"High-performance employees are critical to our success. We will ensure that our
employees have the support needed to succeed."
"High-performance employees are critical to our success. We will ensure that our
employees have the support needed to succeed."
The Long-Term Priority is intended to help OSFI prioritize its work according to
risks. OSFI’s core work continues to be important and contributes to meeting the Long-
OSFI's accountability framework is made up of a variety of elements.
OSFI’s Executive Committee consists of the Superintendent (Chair), and three Assistant
Superintendents who are respectively responsible for the Supervision Sector, the
Regulation Sector, and the Corporate Services Sector. This committee meets on a regular
basis to address all policy, regulatory, and management issues of the agency, including
the setting and approval of OSFI’s annual strategic, operational and financial plans, the
setting of priorities and high-priority projects, the allocation and reallocation of
resources, and the monitoring and reporting of financial results and performance.
OSFI’s Audit Committee is an essential part of OSFI's governance and audit regime
providing independent, objective advice, guidance and recommendations to the
Superintendent regarding the sufficiency, quality and results of assurance on the
adequacy and functioning of OSFI's risk management, control and governance framework and
processes. In order to give this support to the Superintendent, the Committee exercises
active oversight of core areas of OSFI management, control and accountability, including
reporting. For more information on OSFI’s Audit Committee, visit About OSFI/Audit Committee on OSFI’s Web site.
OSFI’s internal audit group conducts assurance audits based on a comprehensive risk-
based audit plan that is posted at About OSFI/Reports/Internal Audit Reports. Audit reports,
which include management’s response to any identified issues, are also posted.
OSFI issues an Annual Report and its financial statements are audited annually. In
accordance with Treasury Board Secretariat requirements, OSFI also issues a Report on
Plans and Priorities and a Departmental Performance Report, both of which
are tabled in Parliament annually. These reports are disclosed at About OSFI/Reports/Reports.
The Business Council (BC) takes a “big picture” view of all the Information Management
/ Information Technology (IM/IT) initiatives that are requested, and determines the IM/IT
investment spending and allocation of funds. Considering common sense principles such as
affordability of ongoing system operating costs and the need to maintain existing
technology, the BC recommends a “balanced” portfolio to the Executive for consideration
during yearly budget discussions. The Business Council provides portfolio and project
management oversight authority relating to OSFI’s IM/IT investments. It oversees the
implementation of the OSFI IM/IT Portfolio and ensures OSFI priority and IM/IT strategy
alignment. The Business Council, through its chairperson, the Chief Information Officer
(CIO), is responsible to the OSFI Executive Committee. It delegates authority and
provides support to its sub-committee (IM/IT Change Advisory Board (CAB)) for non-project
IM/IT changes and initiatives. As well, it creates and provides direction for subordinate
working groups as and when required. Issues that remain unresolved at the Business
Council level will be referred to the OSFI Executive Committee for resolution. The
decision of the Executive Committee is final. The Business Council meets quarterly, or on
a regular occurrence at the discretion of the Chair. Meetings are scheduled in
coordination with relevant deadlines in the OSFI business planning and budget development
OSFI participates in established international reviews jointly led by the World
Bank/International Monetary Fund to determine whether OSFI is meeting internationally
established principles for prudential regulators. OSFI also regularly conducts anonymous
surveys of, and consults with, knowledgeable industry observers to assess its performance
and effectiveness as a regulator. Consultation and survey results are disclosed on OSFI’s
Web site under About
OSFI/Reports/Consultations and Surveys.
The Office of the Chief Actuary (OCA) is an independent unit within OSFI that provides
actuarial valuation services to the Government of Canada in the form of reports tabled in
Parliament and actuarial advice to various government departments. While the Chief
Actuary reports to the Superintendent, the Accountability Framework for the OCA makes clear that the Chief Actuary is
solely responsible for the content and actuarial opinions in reports prepared by the OCA
and for the actuarial advice provided to the relevant government departments, including
the executive arm of provincial and territorial governments, which are co-stewards of the
Canada Pension Plan (CPP). More information is available on OSFI’s Web site under the Office of the Chief Actuary.
OSFI has a number of key responsibilities that it must perform to meet its mandate and
strategic objectives. In any year, there may be specific activities or initiatives
related to these responsibilities.
This program involves regulating and supervising federally regulated financial
institutions (FRFIs) to determine whether they are in sound financial condition and are
complying with their governing statute law and supervisory requirements; monitoring the
financial and economic environment to identify issues that may impact these institutions
negatively; and intervening in a timely manner to protect depositors and policyholders
from undue loss, while recognizing that management and boards of directors are ultimately
responsible, and that financial institutions can fail.
Costs for this program are recovered through base assessments and user fees and
charges paid by the federally regulated financial institutions covered under the Bank
Act, Trust and Loan Companies Act, Insurance Companies Act and
Cooperative Credit Associations Act.
This program has three sub-activities:
This sub-activity involves the administration and application of an effective
supervisory process to assess the safety and soundness of regulated financial
institutions by evaluating an institution’s risk profile, financial condition, risk
management processes, and compliance with applicable laws and regulations. This program
includes activities to monitor and supervise financial institutions; monitor the
financial and economic environment to identify emerging issues; and intervene on a timely
basis when a financial institution’s business practices may be imprudent or unsafe, by
exercising supervisory powers to take, or require management or boards to take, necessary
corrective measures as rapidly as possible to protect depositors and policy holders,
while recognizing that all failures cannot be prevented.
This sub-activity involves advancing and administering a regulatory framework of rules
and guidance that promotes the adoption by regulated financial institutions of sound risk
management practices, policies and procedures designed to plan, direct and control the
impact on the institution of risks arising from its operations. This sub-activity
encompasses the issuance of regulations and guidance, input into federal legislation and
regulations affecting financial institutions; contributions to accounting, auditing and
actuarial standards; and involvement in a number of international regulatory
This sub-activity involves evaluating and processing applications for regulatory
consent; establishing positions on the interpretation and application of the federal
financial institutions legislation, regulations and guidance; identifying precedential
transactions that may raise policy or precedent-setting issues and developing
recommendations that recognize the need to allow institutions to compete effectively
while undertaking reasonable risks that do not unduly impact OSFI’s primary stakeholders,
the policyholders and depositors of FRFIs.
This program activity involves regulating and supervising federally regulated private
pension plans to determine whether they are meeting minimum plan funding requirements and
are complying with their governing law and supervisory requirements. This program
provides risk assessments of pension plans covering employees in federally regulated
areas of employment; timely and effective intervention and feedback to protect the
financial interests of plan members and beneficiaries from undue loss, while recognizing
that plan administrators are ultimately responsible, and that plans can fail; a balanced
relevant regulatory framework; and a prudentially effective and responsive approvals
process. This program incorporates risk assessment and intervention, regulation and
guidance, and approvals and precedents related to federally regulated private pension
plans under the Pension Benefits Standards Act, 1985. The costs for this
program are recovered from pension plan fees based on the number of members in each
federally regulated pension plan.
This program activity, through the Office of the Chief Actuary, provides a range of
actuarial services, under legislation, to the Canada Pension Plan (CPP) and some federal
government departments. It conducts statutory actuarial valuations of the CPP, Old Age
Security (OAS) and Canada Student Loans programs, and pension and benefits plans covering
the Federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police
(RCMP), federally appointed judges, and Members of Parliament.
Internal Services are groups of related activities and resources that are administered
to support the needs of programs and other corporate obligations of an organization.
Activities include developing and implementing cost-effective, secure and reliable
information management systems that contain relevant, accurate and timely internal and
external data. These information systems are complemented by the development and delivery
of effective financial, human resources and administration, security, internal audit,
communication and administrative policies, advice and guidance. The objective is to
ensure that OSFI has the processes and systems in place to enable a motivated and skilled
workforce to focus on its supervisory and regulatory activities.
OSFI operates in a constantly changing environment reflected in uncertain economic and
financial conditions and an industry that can undergo periods of rapid change and that is
becoming increasingly complex. OSFI's ability to achieve its mandate and objectives is
impacted by the range of risks that exist in such circumstances. The challenge is to
effectively and efficiently identify, evaluate, prioritize and develop initiatives to
address areas where exposure is greatest.
OSFI's Enterprise-wide Risk Management (ERM) framework divides risks into external
and internal categories. The external risk category consists of economic and financial
conditions, the financial industry environment, OSFI's legal environment and catastrophic
events. External risks arise from events that OSFI cannot influence, but are monitored in
order to mitigate their potential impact on OSFI's operations. The internal risk category
consists of operational risks that are broadly categorized as people, processes
(governance processes, internal processes, and relationship management processes),
enabling supporting systems, and culture (core values and change management).
OSFI's ERM process has identified several key risks to the achievement of its mandate
and objectives, as follows:
The economic outlook for major foreign economies and for Canada remains uncertain. The
U.S. recovery continues to proceed at a modest pace but questions remain about whether
medium-term fiscal challenges can be addressed in an orderly manner. Europe entered its
second recession in 2012 and while observers expect that growth will return, growth
prospects will likely continue to be constrained by the need to reduce debt levels in a
number of countries. Structural reforms are necessary to restore market confidence in
Europe but the implementation risks are high and a re-escalation of the crisis in the
euro area continues to be a material risk. A deepening of Canada’s economic ties with
China is occurring against a backdrop of slowing growth in China and concerns about
excessive reliance in China on public investment, potential imbalances in the Chinese
housing market and risks emanating from China’s growing shadow banking sector.
The Canadian economy could also be more susceptible to adverse shocks compared to the
last recession. Elevated household debt levels not only make households more vulnerable
to adverse shocks but continued low interest rates could encourage even higher household
indebtedness for a period of time. Also, consumers themselves could become a drag on
economic growth if they take action to rein in spending to address their indebtedness or
a decline in housing prices results in a pronounced, negative wealth shock. Cyber
attacks are also increasing in frequency globally.
Global and domestic financial events require that OSFI be in a position to respond
effectively to a continually evolving economic and regulatory environment. On a micro-
level, prevailing conditions continue to put pressure on OSFI staff to provide
interpretations or to reassess existing guidance to ensure its effectiveness under
stressful and evolving conditions. Specific strategies have been put in place within
individual divisions, consistent with specialized responsibilities and current projects,
to address ongoing industry developments. Resources continue to be reassigned and
priorities realigned as necessary.
A fundamental redesign of the Basel capital framework for banks and the need to update
prudential regulatory frameworks to address continued disruptions in global financial
markets also require banks and regulators to focus more on the measurement of risks and
its relation to the overall level of capital adequacy, leverage and liquidity. OSFI
expects that the review, consultation and implementation of these changes will require
more resources by both financial institutions and OSFI to address the number, breadth and
novelty of more international rules and the need to monitor and advocate for comparable
and timely implementation of these rules in peer jurisdictions. It is expected that
policies and guidelines comprising OSFI's current prudential framework will have to be
updated to incorporate new issues, information and lessons learned from the recent
economic turmoil and the evolution of the structure of financial markets in reaction to
new internationally required prudential standards. Monitoring the impact of new standards
on bank behaviour will become equally important.
Work is underway in Canada as well as in many countries and international fora to
develop more risk-sensitive capital frameworks for insurance companies. In Canada, the
capital tests are called Minimum Continuing Capital and Surplus Requirement (MCCSR) and
the Minimum Capital Test (MCT). Both companies and regulators recognize the need to have
more risk sensitive approaches that better reflect the issues arising from increasingly
complex products, dynamic markets, and accounting changes, while ensuring that they do
not give rise to inappropriate volatility in regulatory capital requirements, especially
for companies with long-term liabilities. In this regard, OSFI’s Life Insurance Regulatory Framework, which was released
in September 2012, sets out OSFI’s priorities over the next three years.
OSFI continues to monitor key accounting projects proposed by the International
Accounting Standards Board (IASB) and their impacts on FRFIs. There are two key projects
that will impact banks and insurers: replacement of Financial Instruments, and Insurance
Contracts Phase II. The Financial Instruments project proposes increased use of fair
value and expected loss provisioning for loans. The Insurance Contracts Phase II project
proposes to fundamentally change the valuation of insurance liabilities and recognition
of revenue. The impacts of the changes from these projects are extensive in that they
will not only change the accounting, but will also significantly impact loan values and
provisions, actuarial standards, and the regulatory capital regime. It is crucial that
OSFI continues to anticipate, understand and, when practicable, influence such changes so
that OSFI will continue to be able to perform accurate risk assessments of financial
institutions and will be able to adjust the regulatory capital framework as required.
The 2008 financial crisis has sparked much international and domestic discussion as
well as proposals on how the audit function at financial institutions could be enhanced
in order to contribute to increased financial stability. The role of the auditor, the
scope of audits, and the audit report are being discussed and scrutinised on many levels.
OSFI is actively monitoring and participating in domestic and international work efforts
to improve audit quality (internationally through the Financial Stability Board (FSB),
the Basel Committee on Banking Supervision (BCBS), and the International Association of
Insurance Supervisors (IAIS), and domestically through the Auditing and Assurance
Standards Board (AASB) and Auditing and Assurance Standards Oversight Council (AASOC)),
and will make specific recommendations feeding into those work efforts as
The financial crisis has also highlighted the need for further enhancements in the
disclosure of public information on the financial condition and risk management practices
of internationally-active financial institutions. In 2012, the Financial Stability Board
welcomed 32 recommendations from a private-sector led task force to enhance the public
disclosure of information by banks on their financial condition and risk management
practices. OSFI is supporting the efforts of the six major Canadian banks as they develop
plans to implement the recommendations of that report so that they can continue to be
among the most forthcoming internationally in the public disclosure of this information.
OSFI's success is dependent upon having employees with highly specialized knowledge,
skills and experience to regulate and supervise financial institutions, identify
significant issues, and perform accurate risk assessments.
A volatile global economy, increasingly complex products, changes to prudential
regulation and emerging risks in the industry also mean that OSFI needs to be able to
attract, motivate, develop and retain skilled people, particularly those whose skills are
in demand in the financial sector. Although OSFI has grown significantly in recent years
and turnover remains low, new OSFI responsibilities or existing areas which are of
increased concern to OSFI could result in the need for new resources going forward. OSFI
promotes a continuous learning environment to enable employees to meet the challenges
under constantly changing conditions. Not having sufficient skill sets in place can
result in an over reliance on certain key resources, which can lead to other people
Enabling technology and a robust, secure and well-supported Information
Management/Information Technology (IM/IT) infrastructure are key success factors to OSFI
in meeting its mandate. OSFI must ensure that the necessary information systems and
infrastructure are in place to effectively support its supervisory and regulatory
activities. OSFI has undertaken a multi-year information technology renewal initiative
(ITR) in support of a long term IM/IT Strategy to mitigate this risk. Implementation
issues related to this initiative are being closely monitored and evaluated.
Economic and financial conditions have a significant impact on the environment
within which financial institutions operate. A clear understanding of the risks
emanating from the economy and financial systems ensures that effective regulatory and
supervisory actions are undertaken.
The regulatory agenda globally is changing rapidly. A clear understanding of
developments ensures appropriate actions are undertaken by OSFI to maintain a regulatory
framework that continues to be effective and responsive.
Active recruitment, development and management of OSFI employees will allow for
continued successful delivery of OSFI business goals.
Enhancing internal systems, processes, and knowledge transfer, will enable OSFI to
work more effectively and efficiently.
PRPPs are a new retirement savings option introduced by the Federal government of Canada and brought into force on December 14, 2012.
Return to footnote 1 referrer
International standard setters include the BCBS, IAIS, IASB and the International Auditing and Assurance Standards Board (IAASB). Domestic standard setters include the Accounting Standards
Board, the AASB, the Canadian Public Accountability Board and the Canadian Auditing and Assurance Standards Oversight Committee (AASOC).
Return to footnote 2 referrer