Office of the Superintendent of Financial Institutions
In April 2021, OSFI released a discussion paper entitled “Assurance on Capital, Leverage and Liquidity Returns”. The purpose of this discussion paper was to engage federally regulated financial institutions (FRFIs), and other interested stakeholders in a dialogue with OSFI, to proactively enhance and align assurance expectations over key regulatory returns.
OSFI received feedback on its discussion paper from 35 respondents, including FRFIs, audit firms, industry, and professional associations. OSFI thanks those who submitted comments.
The purpose of this letter is to update institutions on the development of an assurance guideline.
OSFI received a range of suggestions on the discussion paper. The summary of respondent feedback highlighted in this letter reflect those issues raised by a larger number of respondents. These issues as well as the other feedback received from stakeholders will be assessed by OSFI and considered in the development of a draft guideline.
Most respondents questioned the need for the implementation of a system-wide assurance initiative. The respondents suggested that OSFI rely on existing assurance practices (management policies and procedures, internal audit and external audit practices and opinions) and engage with individual institutions for additional assurance based on specific risk assessments.
Most respondents suggested deferring the effective date of the new assurance requirements by a minimum of one year to fiscal 2024, which is after the implementation of IFRS 17 and Basel III reforms. Some respondents suggested a staggered implementation approach.
Some respondents indicated that any new assurance requirements should remain risk-based, and principles-based where the assurance approaches for Federally Regulated Insurers and Deposit Taking Institutions consider the differences in inherent risks within these respective industries. Respondents also indicated that the new assurance requirements should consider proportionality. Some respondents suggested a reduction in scope to address costs versus benefits for smaller institutions.
Most respondents suggested that duplication of internal and external audit effort should be avoided across assurance requirements. Respondents suggested that external audit focuses on a substantive audit of regulatory returns excluding testing of controls given internal audit is best positioned to focus on controls and processes.
OSFI agrees guidance on assurance should be principles-based and risk-based. OSFI continues to believe the implementation of an Assurance Guideline will help to promote continued public confidence in the Canadian financial system.
OSFI will consider the responses to the discussion paper in preparing and issuing a draft guideline in the first quarter of 2022. Subsequently, OSFI will engage with stakeholders and interested parties to develop the final guidance by the third quarter of 2022.
Ben Gully Assistant Superintendent, Regulation Sector