Office of the Superintendent of Financial Institutions
The primary objective of the research was to explore Board Director impressions of OSFI in the discharge of a number of key elements of its mandate as a prudential regulator.
Findings are based on a total of 30 telephone and in-person interviews completed among Board Directors of Canada's largest deposit-taking institutions, life insurance and property and casualty insurance companies. Of these interviews, 27 were conducted in English and 3 were conducted in French. Interviews were undertaken from March to June 2015. The average interview length was 60 minutes.
This consultation employed a qualitative methodology. While the findings provide an indication of participants' views about the issues explored, they cannot be generalized to the full population of Board Directors of the largest companies and institutions regulated by OSFI. The findings from this research are intended to provide themes and direction.
Much of the feedback received about OSFI throughout this consultation was positive. Positive evaluations were based on perceptions that OSFI has a depth of knowledge about the companies and institutions it regulates, an understanding of issues in the marketplace, and that its interactions with regulated entities are professional and non-adversarial. Board Directors observed that these characteristics are fundamental to fostering open dialogue between OSFI and the companies and institutions that it regulates.
In addition, Board Directors suggested that OSFI is providing value in its dealings with regulated entities. Value was often described as the sharing of best practices gained from OSFI's interactions with the companies and institutions it regulates and through its participation in the Financial Stability Board and other regulatory forums.
Overall, commentary about OSFI's supervisory effectiveness was also positive. Participants generally felt that OSFI focuses on the appropriate issues, those which are also seen as important by boards and management. Further, Board Directors suggested that OSFI appears to be fostering open dialogue in the supervisory process.
Emerging Issues and Risk Governance
Many Board Directors reported that they believe OSFI has been proactive in responding to emerging issues. However, OSFI's perceived early adoption of international regulatory initiatives was often referenced as an example of how proactivity can serve to disadvantage Canada's financial services sector.
Board Directors identified risk governance as an area in which OSFI has improved significantly. OSFI's focus on this area was viewed as appropriate and a natural response to the financial crisis. Further, it is perceived to have strengthened the independence of risk management functions, internal risk reporting and documentation, and underwriting performance.
OSFI was generally deemed to have been effective in conveying to boards the responsibilities and reporting lines required to comply with the Corporate Governance Guideline. However, some concerns were raised regarding the perception that, when applying the Guideline, OSFI does not always scale its assessments based on the nature, scope, complexity and risk profile of each institution or company.
Further, there was a perception among some that the guideline is driving boards into areas of responsibility that are beyond their mandate, areas that have traditionally been understood to be the responsibility of management. Board Directors expressed the view that the role of boards should not be extended in this manner.
OSFI Corporate Governance representatives were considered knowledgeable in the area of corporate governance guidance. While perceived to be professional and collaborative in their interactions with Board Directors, many felt that knowledge of corporate governance among OSFI representatives tends towards the theoretical rather than based on practical board experience.
Communications Between OSFI and Board Members
An overarching theme of this consultation is that communications and interactions between OSFI and board members have improved significantly over the past three to four years. A number of factors were perceived to be driving this improvement, including: the format and scope of discussion at annual board meetings and more regularized meetings including mid-year and off-cycle meetings, both of which were believed to afford Board Directors a better understanding of OSFI's concerns.
The final report is available on the Library and Archives Canada website.