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.
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.
Table of Contents
Clear Expectations: OSFI’s Priorities and Agenda
On November 4, Superintendent Peter Routledge outlined OSFI’s future priorities and policy agenda as well as an end to OSFI’s March 2020 expectations on capital distributions.
OSFI has removed its expectation that federally regulated financial institutions refrain from increasing dividends, repurchasing shares or raising executive compensation….We expect responsibility, humility and prudence from boards of directors and their senior management when making decisions regarding capital distributions.
OSFI’s Financial-sector Wide Announcements
Many aspects of our work cross all sectors of the financial system. Our ongoing work contributes to confidence in the Canadian financial system though critical consideration of risks and clear actions and expectations.
- Statement by the Superintendent of Financial Institutions on the lifting of restrictions on dividends, share repurchases and executive compensation [ 2021‑11-04 ]
- OSFI Summarizes Responses to Its Climate Risk Discussion Paper [ 2021‑10‑12 ]
- Statement from the Superintendent: National Day for Truth and Reconciliation [ 2021‑09‑28 ]
- OSFI issues updated requirements for technology and cyber incident reporting and new cyber self-assessment [ 2021‑08‑13 ]
- OSFI Regulatory Affairs Division Webcast - Video Recording [ 2021‑07‑22 ]
- Operational Risk and Resilience [ 2021‑07‑06 ]
- Consultation on the prudential treatment of crypto asset exposures [ 2021‑07‑05 ]
- OSFI finalizes its Guideline on Foreign Entities Operating in Canada on a Branch Basis [ 2021‑06‑28 ]
- Appointment of Peter Routledge as Superintendent of Financial Institutions [ 2021‑06‑24 ]
- Transition from LIBOR [ 2021‑06‑22 ]
Domestic Stability Buffer
- OSFI sets the DSB level to 2.50% effective October 31, 2021 [ 2021‑06‑17 ]
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. In June of 2021, we increased the buffer to above pre-pandemic levels, effective Octber 31, 2021.
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 December 2021 in keeping with our regular cycle, unless circumstances require an adjustment in the interim.
Minimum Qualifying Rate
As mortgages are one of the largest exposures that most banks carry, ensuring that borrowers are able to repay their loans strongly contributes to the continued safety and soundness of Canada’s financial system. Sound underwriting includes a margin of safety that ensures borrowers will have the ability to make mortgage payments in the event of change in circumstances, such as the reduction of income or a rise in mortgage interest rates.
In May we announced that, effective June 1, the minimum qualifying rate for uninsured mortgages (i.e., residential mortgages with a down payment of 20 percent or more) will be the greater of the mortgage contract rate plus 2 percent or 5.25 percent.
We also committed to a new process to review and communicate the qualifying rate at a minimum annually, every December.
Executive speeches and events
Clear Expectations: OSFI’s Priorities and Agenda - Remarks by Superintendent Peter Routledge, Virtual event hosted by OSFI via webcast on November 4, 2021
The Fierce Urgency of Now: The Canadian Financial Sector in a Post-Pandemic World, a Prudential Perspective - Remarks at the 2021 Global Risk Institute Annual Summit, Virtual event on September 29, 2021
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.
Recent announcements include:
- OSFI adjusts temporary exclusions from leverage ratio exposure measures; to take effect at end of 2021 [ 2021‑08‑12 ]
- Draft Pillar 3 Disclosure Guideline 2023 for SMSBs [ 2021‑08‑05 ]
- OSFI issues proposed regulatory changes to the treatment of CVA [ 2021‑06‑18 ]
- Proposed Operational Risk Capital Data Management Expectations [ 2021‑06‑18 ]
We continue to advance a regulatory framework supervisory approach for insurers that supports continued improvements to thier resilience to financial and non-financial risks. OSFI remains committed to working with the industry and key stakeholders to support a robust implementation of International Financial Reporting Standard 17 - Insurance Contracts (IFRS 17).
Recent announcements include:
- Consultation outcomes - OSFI Guideline Consequential Changes as a Result of IFRS 17 [ 2021‑11‑17 ]
- Update on the Development of a New Approach for Determining Regulatory Capital Requirements for Segregated Fund Guarantee (SFG) Risk [ 2021‑11‑16 ]
- Memoranda to the Appointed Actuary (Life Insurance and Property and Casualty Insurance) [ 2021‑08‑13 ]
- OSFI Risk Management Webcast for Life Insurers - Video Recording [ 2021‑08‑05]
- OSFI Guideline Consequential Changes as a Result of IFRS 17 [ 2021‑07‑26 ]
- Industry consultation - Draft insurance capital guidelines 2023 [ 2021‑06‑21 ]
- Remarks by Neville Henderson at the Canadian Institute of Actuaries annual conference [ 2021‑06‑17 ]
- Remarks by Stewart McIlwraith to the OSFI Life Risk Management Seminar [ 2021‑06‑09 ]
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.
- Revised Instruction Guide for the Preparation of Actuarial Reports and Summary of Comments Received [ 2021‑11‑05 ]
- 2020-21 Pension Plans Survey Findings [ 2021‑10‑05 ]
- FSRA/OSFI Defined Contribution Pension Plans Technical Advisory Committee - Meeting Summary [ 2021‑10‑04 ]
- FSRA/OSFI Defined Contribution Pension Plans Technical Advisory Committee - Meeting Summary [ 2021‑07‑14 ]
- Revised section 2.7.4 of the Instruction Guide for the Preparation of Actuarial Reports and Summary of Comments Received [ 2021‑07‑09 ]
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. Postings since the the previous Pillar include:
- 2022 Actuarial Report on the Employment Insurance Premium Rate [ 2021‑09‑14 ]
- Presentation by Assia Billig, Chief Actuary, on Actuarial Valuations to the Board of Directors of PSP Investments [ 2021‑08‑12 ]
- Assessing the Financial Sustainability of the Base Canada Pension Plan through Actuarial Balance Sheets: Actuarial Study No. 21 [ 2021‑06‑25 ]
- Actuarial Report on the Benefit Plan Financed through the RCMP (Dependants) Pension Fund as at 31 March 2019 [ 2021‑06‑17]