Table of Contents
Progress and Engagement
This edition of the OSFI Pillar includes updates on our regulatory and policy development work across the institutions and pension plans we oversee.
We remain committed to improving both our regulatory and supervisory approaches and our own organization. We acknowledge the uncertainty surrounding the economic environment but continue to uphold our mandate to protect depositors, policyholders and federal private pension plan beneficiaries. To that end, our work increasingly focuses on those non-financial risks that could impact the financial resilience of institutions, such as technology risk and climate risk.
Our recent work includes the development and sharing of an updated forward policy planner. It builds on lessons learned and work continued throughout the COVID-19 pandemic and sets out clear priorities and timelines for developing policies and guidance. In support of our mandate, this work supports the continued resilience of banks, insurers and federally regulated private pension plans.
We have also worked hard to engage more with you, our audience, over the past year. Increasingly our readers are getting their information through OSFI’s social media channels. Our approach continues to evolve to meet the needs of the financial sector and the expectations of the public. We are making greater use of infographics, videos, and plain language explanations of our work. We are also posting videos from our industry-focused risk management seminars on our YouTube channel.
We encourage you to get engaged and keep up to date by following and sharing our social media content. Please join us on Twitter at @OSFICanada or on LinkedIn at Office of the Superintendent of Financial Institutions.
Throughout the pandemic, Canada’s banks and deposit-taking institutions have demonstrated resilience, continuing to provide loans to support borrowers while maintaining robust capital levels.
Domestic Stability Buffer
On March 13, 2020 we reduced the Domestic Stability Buffer (DSB) level to 1.00% (from 2.25%) to support banks' ability to supply credit to the economy during an expected disruption related to COVID-19 and related market conditions. Banks were expected to use this additional lending capacity to support businesses and households. As part of our twice-annual review of the DSB, on June 23, 2020 and December 8, 2020 we reaffirmed the decision to keep the level at 1.00%.
We continue to monitor several key systemic vulnerabilities including Canadian household and corporate indebtedness, asset imbalances, and the evolution of the pandemic and its impact on economic recovery.
The next DSB review is scheduled for June 2021 in keeping with our regular cycle, unless circumstances require an adjustment in the interim.
Insurance IFRS 17 project update
The accounting transition to International Financial Reporting Standard 17 - Insurance Contracts (IFRS 17) continues to be a significant undertaking both for the industry and for OSFI.
While 2020 brought a number of disruptions, we made it a priority to restart IFRS 17 policy work with industry and provide an updated timeline—including notification of a deferred effective date—in August 2020. Upon restarting this work, we reasserted the importance of a quality transition to, and a robust implementation of, IFRS 17 for annual periods beginning in January 2023.
We announced a more focused plan in September 2020 and have issued updated regulatory returns for use upon implementation. This will allow institutions ample time to adapt and prepare their own systems for the revised disclosure requirements of IFRS 17.
We are also launching an industry-focused Quantitative Impact Study (QIS), the results of which will help inform whether any final calibration, phase-in or transitional adjustments are required. Further, draft capital adequacy test guidelines for the insurance industry remain on track with a consultation set to begin in June.
We remain committed to working with the industry and key stakeholders to support a robust IFRS 17 implementation.
Private pension plans
We have increased efforts to coordinate with provincial regulators to help protect and inform pension plan beneficiaries. We’ve also refined directives and expectations through publicly communicating the measures we are taking to support appropriate and reasonable safeguards. Since the beginning of the year, we have released a series of forms, instructions and announcements to continue to provide clarity for plan administrators on our expectations.
- Final Instruction Guide for the Termination of a Defined Benefit Pension Plan [ 2021-05-05 ]
- Final Instruction Guide for the Termination of a Defined Contribution Pension Plan and Summary of Comments Received [ 2021-05-05 ]
- FSRA/OSFI Defined Contribution (DC) Pension Plans Technical Advisory Committee ‑ Meeting Summary, March 26, 2021 [ 2021-05-03 ]
- New Instruction Guide - Pooled Registered Pension Plan Annual Information Return, Auditor’s Report and the Pension Plan Annual Corporate Certification [ 2021-04-26 ]
- Revisions to the Directives of the Superintendent [ 2021-02-25 ]
- Replicating Portfolio Information Summary – Revised Instruction Guide and Form [ 2021-02-15 ]
- Actuarial Information Summary – Revised Instruction Guide and Form [ 2021-02-15 ]
Risk Support Services
Spotlight on the work of the Culture and Compliance Risk Division
In a past issue of The Pillar we provided a glimpse into the development of assessment methodology and related tools driving the advancement of our culture supervision efforts. We mentioned that OSFI is leveraging the external knowledge, experience and expertise of our Culture External Advisory Committee (CEAC), formed in September 2019.
In this issue of The Pillar, we are pleased to share with you the names of the current external members of the CEAC. They are:
- Alister Campbell – President and CEO, Property and Casualty Insurance Compensation Corporation (PACICC);
- Alexander Dyck – Professor of Finance and Economic Analysis and Policy, Manulife Financial Chair in Financial Services, Rotman School of Management, University of Toronto;
- Kathleen Heppell-Masys – Director General, Directorate of Security and Safeguards, Canadian Nuclear Safety Commission;
- Dieter Jentsch – Corporate Director; former Co-CEO, Scotia Capital Inc. and Group Head of Global Banking and Markets, Scotiabank;
- Andrew Kriegler – President and CEO, Investment Industry Regulatory Organization of Canada (IIROC); and
- Hubert T. Lacroix – Strategic Counsel, Blake, Cassels & Graydon LLP and former President and CEO of CBC/Radio-Canada.
The CEAC has thus far provided practical advice and guidance in strategic areas of focus such as the role of data in our culture review methodology as well as potential partnerships with academic institutions and other government agencies. We will continue to seek their guidance in our development of a supervisory model for assessing culture-related risks at FRFIs.
OSFI Corporate Services
In the last year, OSFI has gone through an exercise to refresh its corporate values. Respect, curiosity, and stewardship are our core principles. They represent what we believe in, what we stand for and what we expect of one another. They guide all of our actions and decision-making in support of our vision and overall success.
We treat all people with respect by:
- Empowering diversity of thought;
- Promoting inclusion and collaboration; and
- Behaving with authenticity and professionalism.
We embrace a mindset of curiosity by:
- Building knowledge through active engagement and focused inquiry;
- Improving continuously and innovating;
- Building a safe-to-fail environment; and
- Challenging complacency and the status quo.
We exhibit sound stewardship by:
- Acting with integrity and taking accountability;
- Making decisions in an informed, transparent and balanced manner; and
- Upholding the credibility and reputation of OSFI.
NCR Top Employer of 2021
The Office of the Superintendent of Financial Institutions has been selected as one of the National Capital Region’s Top Employers of 2021. This special designation recognizes the employers in the Ottawa-Gatineau metropolitan area that offer exceptional places to work. The annual competition is organized by the editors of Canada's Top 100 Employers.
We employ approximately 860 dedicated professionals who make up our multidisciplinary team. We strive to create a diverse and inclusive workforce and strongly believe in investing in our people.
Office of the Chief Actuary
The Office of the Chief Actuary (OCA) is an independent unit within OSFI that provides a range of actuarial valuation and advisory services to the Government of Canada. The OCA continues to provide appropriate checks and balances on the future costs of the different pension plans and social programs that fall under its responsibility, including the Canada Pension Plan (CPP), the Old Age Security Program and the Canada Student Loans Program. Throughout the COVID-19 pandemic it has continued to table actuarial reports in Parliament and issue fact sheets to share its expertise.
- Actuarial Report on the Government Annuities as at 31 March 2020 (PDF, 1.11 MB) [ 2021-02-16 ]
- Old Age Security (OAS) Program Mortality Experience Fact Sheet - November 2020 [ 2020-11-30 ]
- Registered Pension Plans (RPP) and Other Types of Savings Plans – Coverage in Canada [ 2020-11-30 ]
- Actuarial Report on the Regular Force Death Benefit Account as at March 31, 2019 [ 2020-11-25 ]
- Actuarial Report on the Pension Plans for Regular Force and Reserve Force as at March 31, 2019 [ 2020-11-25 ]
- Actuarial Report on the Pension Plan for Federally Appointed Judges as at March 31, 2019 [ 2020-11-25 ]
- Actuarial Report on the Pension Plan for the Members of Parliament as at March 31, 2019 [ 2020-11-25 ]
- 16th Actuarial Report on the Old Age Security Program as at 31 December 2018 [ 2020-10-21 ]
On January 15, 2020 we released our previously delayed discussion paper titled Developing Financial Sector Resilience in a Digital World: Selected Themes in Technology and Related Risks. The paper presented our most recent work on a wide range of risks pertaining to technology. Cyber security, advanced analytics, and the technology third-party ecosystem remain the key focus areas throughout the COVID-19 pandemic and will continue as such. The paper also shared OSFI's preliminary direction on these key focus areas, and sought stakeholder views to inform future prudential policy development. This consultation closed on December 15, 2020, although industry developments continue to drive discussions. Future reforms and more detailed proposals have been announced in a letter summarizing the input received.
On January 11, 2021 we published a discussion paper titled Navigating Uncertainty in Climate Change: Promoting Preparedness and Resilience to Climate-Related Risks. The objective of our work in this area is to promote better preparedness for, and resilience to, climate-related risks before they negatively affect the financial condition of the financial institutions and pension plans we regulate. The discussion paper considered how climate-related risks can drive financial, operational, strategic and reputation risks of FRFIs and FRPPs. It also shared our insights on possible prudential tools for enhancing preparedness and resilience to these risks. This included a discussion of the respective roles of capital requirements, the supervisory review process and market discipline in promoting resilience to climate-related risks. The consultation period closed on April 12, 2021. The input received and discussions that occurred will help inform the potential need for OSFI guidance in this area. OSFI is currently considering all of the input and will release a summary of comments and next steps once that work is completed.
Basel III: Advancing a more resilient and proportional banking regulatory framework in Canada
On March 11, 2021, we launched consultations on Basel III implementation and a new tailored approach to capital and liquidity requirements for smaller, less complex banks. Our commitment to implementing the international Basel III Framework has strengthened Canadian banks and improved their ability to handle financial shocks, allowing them to continue supporting economic growth while remaining competitive. The proposed measures are intended to further advance a more resilient and proportional bank regulatory regime in Canada that protects depositors, maintains market confidence and promotes continued financial stability, especially during times of stress.