OSFI Superintendent Transition Binder

About OSFI

A brief overview of our organization, including a journey through our history, understanding why we exist and our role in the industry, as well as an overview of our Strategic Plan.

Legal Primer

Statutory Mandate

OSFI’s mandate is set out in s. 4 of the Office of the Superintendent of Financial Institutions Act (OSFI Act), which is:

• to supervise financial institutions in order to determine whether they are in sound financial condition and are complying with their governing legislation and, in doing so, to strive to protect the rights and interests of depositors, policyholders and creditors of financial institutions;

• to supervise pension plans in order to determine whether they meet minimum funding requirements and are complying with the legislation and, in doing so, to strive to protect the rights and interests of plan members and other plan beneficiaries.

OSFI is considered as a “prudential” or “solvency” regulator (as opposed to “market conduct” regulator).

OSFI’s mandate can be described as trying to ensure that regulated entities will “keep their promises”:

• by ensuring that financial institutions prudently manage their assets so as to increase the chances they will have sufficient financial resources to fulfill the promises they made to their clients (i.e. to pay all amounts due under a certificate of deposit or to pay all insurance benefits due under an insurance policy);

• by ensuring that pension plans are adequately funded so as to increase the chances that there will be sufficient assets in the pension fund to fulfill the promises that employers made to their employees (i.e. to pay pension benefits and other benefits payable under the pension plan).

Supervised Institutions

OSFI supervises federally-regulated financial institutions (FRFIs), which include:

• banks and authorized foreign banks (also known as “foreign bank branches”);

• federally-incorporated insurance companies and foreign insurance companies (also known as “foreign insurance branches”);

• federally-incorporated trust or loan companies;

• federally-regulated cooperative credit associations.

OSFI has authority to supervise regulated bank holding companies and insurance holding companies. However, no such regulated holding companies currently exist (although some inactive insurance companies act as holding companies for their subsidiaries).

OSFI also supervises federally-registered pension plans, which include plans sponsored by employers engaged in federal works, undertakings, and businesses such as:

• banks;

• airlines;

• interprovincial transportation;

• telecommunications;

• employers in the Territories.

Federal Jurisdiction

Financial Institutions

• There is federal jurisdiction to regulate banks.

• There is federal jurisdiction to incorporate insurance, trust or loan companies, and cooperative credit associations and to regulate matters relating to their corporate status.

• There is provincial jurisdiction to incorporate insurance, trust or loan companies, and cooperative credit associations (credit unions) and to regulate their activities.

Pension Plans

• There is federal jurisdiction to regulate labour relations in organizations falling under federal jurisdiction. As such, there is federal jurisdiction to regulate pension plans sponsored by employers engaged in federal works, undertakings, and businesses.

• The vast majority of private pension plans in Canada are regulated under provincial legislation.

• Some plans are subject to both federal and provincial pension legislation. There currently are bilateral agreements between the Minister of Finance and the provinces that delegate powers to the authority to which most plan members are subject. The federal pension legislation authorizes the Minister to enter into a multi-lateral agreement which has the effect of adopting the laws of the authority to which the majority of plan members are subject.

Legislation Administered by OSFI

OSFI is responsible for the administration of the following statutes:

• Bank Act;

• Insurance Companies Act;

• Trust and Loan Companies Act;

• Cooperative Credit Associations Act [no entities are currently subject to this statute];

• Green Shield Canada Act;

• Pension Benefits Standards Act, 1985;

• Pooled Registered Pensions Plans Act;

• OSFI Act.

The Financial Consumer Agency of Canada (FCAC) is responsible for the administration of the consumer provisions that are found in the financial institutions legislation (i.e. the first four statutes on the list above)

OSFI has additional statutory duties under the following statutes:

• Canada Deposit Insurance Act;

• Protection of Residential Mortgage or Hypothecary Insurance Act;

• National Housing Act (examination of commercial operations of CMHC).

Intervention Powers

The legislation grants various intervention powers to OSFI for meeting its mandate, such as:

• conducting on-site inspections;

• requesting production of information;

• imposing terms and conditions;

• requiring special audit or special actuarial valuation;

• issuing a direction of compliance;

• removing directors or senior officers of financial institutions;

• replacing a pension plan administrator;

• imposing administrative monetary penalties (currently available only in respect of financial institutions not pension plans).

If a financial institution experiences financial difficulties which could jeopardize its solvency, OSFI can ultimately take control of the institution and request the Attorney General of Canada to apply for a winding-up order under the Winding up and Restructuring Act (WURA).

Similarly, if a pension plan experiences financial difficulties which could jeopardize the payment of benefits, OSFI can ultimately order the termination of the plan.

Delegation of Authority

• Any officer or employee of OSFI may exercise the powers of the Superintendent under the legislation if the person is appointed to serve in the Office in a capacity appropriate to the exercise of the power (s. 10 of the OSFI Act).

• As such, there is generally no need for any formal delegation of authority.

• However a few powers, like the authority to take control of an institution, have been excluded from the scope of that authority. Further, terms and conditions have been imposed by the Superintendent on the exercise of certain powers in the Delegation Framework for Exercising the Superintendent’s Powers.

Legal Status of OSFI

• OSFI is an office of the Government of Canada that was established pursuant to the OSFI Act.

• From an administrative standpoint, OSFI is generally considered as a government department.

• OSFI is not a separate legal entity from the Government of Canada.

• Unlike the Bank of Canada or the Canada Deposit Insurance Corporation, OSFI is not a Crown Corporation.

Reporting Relationship

• OSFI is headed by the Minister of Finance and reports to Parliament through the Minister.

• The Superintendent is the “deputy head” of OSFI and, from that perspective, can be compared to the Deputy Minister of a department.

• The legislation distinguishes between the intervention powers of the Superintendent over FRFIs (e.g. taking control of an institution) and those of the Minister (e.g. approval of corporate transactions). The Superintendent’s statutory powers can be exercised independently.

• The Superintendent is appointed by the Governor in Council (i.e. Cabinet) and holds office “during good behaviour” for a seven year term. The Superintendent can only be removed for cause by the Governor in Council; an Order in Council providing for the removal must be laid before Parliament.

• The legislation gives no specific authority to the Minister or the GIC to issue directions to the Superintendent.

• The Department of Finance is responsible for the development of the policy regarding the legislation that OSFI is responsible for administering.

• In practice, all applications for ministerial approval under the financial institutions legislation are processed by OSFI, which then makes a recommendation to the Minister.

Contracting Authority

• OSFI has no independent authority to enter into legally binding contracts.

• However, OSFI can contract on behalf of the Government of Canada (i.e. “Her Majesty in right of Canada”) pursuant to a formal delegation of signing authority from the Minister of Finance.

• OSFI is subject to government procurement and other contracting rules as administered by the Treasury Board Secretariat and Public Services and Procurement Canada.

Authority to sue and to be sued

• OSFI cannot sue or be sued in its own name.

• Generally, legal proceedings by or against OSFI are instituted by or against the Government of Canada in the name of the “Attorney General of Canada”.

• OSFI and its employees are protected from civil liability by an immunity clause for any action or omission made in good faith in the administration of any federal statutes (s. 39 of the OSFI Act).

• Any person directly affected by a decision made by OSFI may file an application for judicial review pursuant to s. 18.1 of the Federal Courts Act. Judicial review is an examination of whether the decision-maker had legal authority to make the decision, if its decision was reasonable and whether it followed the requirements of procedural fairness.

• Pursuant to s. 39.1 of the OSFI Act, OSFI officers are not compellable as witnesses in civil proceedings.

Staffing Authority and HR Management

• OSFI has no independent authority to hire its own employees.

• OSFI has received delegated staffing authority from the Public Service Commission to appoint employees on behalf of the Government of Canada pursuant to the Public Service Employment Act.

• OSFI is a “separate agency” and, as such, enjoys some flexibility in managing its human resources. OSFI can exercise the powers relating to personnel management that the Treasury Board normally exercises as employer of the rest of the public service. OSFI has authority to set certain terms and conditions of employment. OSFI can, subject to Governor in Council approval, enter into collective agreements with bargaining agents representing its unionized employees.

Financial Authority

• Most of OSFI’s operating costs are recovered from regulated institutions and pension plans pursuant to assessments.

• A small portion of OSFI’s budget relating to the Office of the Chief Actuary comes from public moneys appropriated by Parliament.

• OSFI is also subject to directives and guidelines issued by the Treasury Board (e.g. financial reporting, contracting, etc.).

• OSFI has a department audit committee (DAC) that provides objective advice and recommendations to the Superintendent regarding the sufficiency, quality and results of assurance on the adequacy and functioning of the department’s risk management, control and governance frameworks and processes.

• OSFI does not own property in its own name; all assets under the control of OSFI are the property of the Government of Canada (i.e. Crown assets).

Other Government Legislation

As a government agency, OSFI is subject to a number of statutes including:

• the Access to Information Act;

• the Privacy Act;

• the Official Languages Act;

• the Financial Administration Act;

• the Public Service Employment Act;

• the Federal Public Sector Labour Relations Act;

• the Canadian Human Rights Act;

• the Public Servants Disclosure Protection Act;

• the Conflict of Interest Act (only applicable to the Superintendent);

• the Lobbying Act;

• the Accessible Canada Act (regulations are not yet in force); and

• the Canada Labour Code-Part II (occupational health and safety).

Confidentiality

• The legislation provides that all information obtained by OSFI regarding a financial institution shall be treated as confidential (s. 22 of the OSFI Act and equivalent provisions in each of the financial institutions statute).

Office of the Chief Actuary

• The Chief Actuary is responsible for preparing various actuarial reports pursuant to the Canada Pension Plan, the Public Pensions Reporting Act and the Canada Student Financial Assistance Act.

• The Chief Actuary is appointed by the Superintendent.

Legal Services

• OSFI obtains its legal services from the Attorney General of Canada, which is responsible for advising federal departments on all legal matters pursuant to the Department of Justice Act.

What is OSFI?

Who we are and what we do

The Office of the Superintendent of Financial Institutions (OSFI) is an independent agency of the Government of Canada, established in 1987 to contribute to the safety and soundness of the Canadian financial system. OSFI supervises and regulates federally registered banks and insurers, trust and loan companies, as well as private pension plans subject to federal oversight. OSFI reports to the Parliament of Canada through the Minister of Finance.

OSFI allows financial institutions to take reasonable risks and compete effectively both at home and abroad, while at the same time safeguarding the interests of depositors, policyholders, beneficiaries and pension plan members. OSFI’s goal is to balance competitiveness with financial stability, and international standards with Canadian market realities.

OSFI does not manage the daily operations of financial institutions or private pension plans. Their executive management and boards of directors or trustees are ultimately responsible for the success or failure of the financial institution, but OSFI plays an important oversight role in ensuring that the risk management processes of the institution are prudent. OSFI’s mandate does not include consumer-related issues or the securities industry.

How OSFI is funded

OSFI’s costs are recovered through assessments on the financial services industry and private pension plans OSFI regulates and supervises, and through a user-pay program for selected services. A small portion of OSFI’s revenue is received through an appropriation from the Government of Canada for actuarial services relating to various public sector pension and benefit plans.

What is the OCA within the context of OSFI?

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 provides appropriate check sand 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.

OSFI Video Series

OSFI's YouTube Channel

The Office of the Superintendent of Financial Institutions (OSFI) is an independent agency of the Government of Canada, established in 1987 to contribute to the safety and soundness of the Canadian financial system. OSFI supervises and regulates federally registered banks and insurers, trust and loan companies, as well as private pension plans subject to federal oversight. OSFI reports to the Parliament of Canada through the Minister of Finance.

• About OSFI
• Protecting Canada from a financial crisis

Operational Independence

Parliament’s intention to grant OSFI operational independence in carrying out its mandate is clear from the chosen statutory structure of the Office. For example, Parliament chose to establish OSFI as a separate Office under subsection 4(1) of the OSFI Act with, pursuant to section 3.1 of the Act, the stated purpose of contributing to public confidence in the Canadian financial system.

Section 5 of the OSFI Act provides that OSFI will be headed by a Superintendent who is appointed by the Governor-in-Council for a fixed term of seven years, a term that is not linked to the usual four-year mandate of the government in power. Further, the appointment is made “during good behaviour,” meaning that the Superintendent can only be removed for cause (as opposed to “during pleasure, ”where the incumbent can be easily replaced during a term), which ensures a material degree of operational independence.

OSFI has the sole legal mandate for the supervision of banks in Canada and is also responsible for supervising other FRFIs that are federally incorporated or registered. As an agency, OSFI demonstrates a strong consciousness of its mandate. The legislation OSFI administers provides OSFI with a wide range of powers that are essential to the performance of effective supervision and provides the framework within which OSFI sets and enforces the minimum prudential standards. The sunset clause (mandatory five-year revision) contained in the legislation governing FRFIs provides a legal framework with a ready capacity to be periodically updated to reflect the demands of the financial system and expectations placed on supervisory practice.

Mandate & Vision

Mandate

Protecting depositors, policyholders, financial institution creditors and pension plan members, while allowing financial institutions to compete and take reasonable risks. Providing actuarial valuation and advisory services to the Government of Canada.

Vision

Building OSFI for today and tomorrow: preserving confidence, ever vigilant, always improving

Corporate Artifacts

One Office, OSFI Compass, Corporate Values, our Vision, and more: corporate artifacts help define our identity

why we exist

Protect depositors, policyholders, financial institution creditors and pension plan members, while allowing financial institutions to compete and take reasonable risks. Provide actuarial valuation and advisory services to the Government of Canada through the Office of the Chief Actuary.

what success looks like

Building OSFI for today and tomorrow: preserving confidence, ever vigilant, always improving.

how we operate

• We are results-oriented
• We are principles-based
• We are risk-based
• We take a balanced approach
• We set the benchmark

how we collaborate

One Office was created to minimize silos and to encourage communication and collaboration. It has 3 broad elements:

one mandate --- one activity --- one voice

how we live our values

RESPECT

We treat all people with respect by:

• Empowering diversity of thought
• Promoting inclusion and collaboration
• Behaving with authenticity and professionalism

STEWARDSHIP

We exhibit sound stewardship by:

• Acting with integrity and taking accountability
• Making decisions in an informed, transparent, balanced manner
• Upholding the credibility and reputation of OSFI

CURIOSITY

We embrace a mindset of curiosity by:

• Building knowledge through active engagement focused inquiry
• Improving continuously and innovating
• Building a safe-to-fail environment
• Challenging complacency and the status quo

Organizational Overview

An overview of the OSFI organizational structure and details of each business line, including the interaction and relationship between the business lines.

Org Structure

Text Description - Org Structure

Superintendent

• Internal Audit
• Office of the Chief Actuary
• Regulation
  • Capital
  • Regulatory Affairs
  • Accounting Policy
  • Private Pension Plans
• Supervision
  • Deposit-Taking
    • Small and Medium Sized Banks
    • Conglomerates
    • Recovery & Resolution
    • Central Office
  • Insurance
    • P&C
    • Life
    • Actuarial
    • Mortgage Insurance
  • Risk Support
    • Financial Risk
      • Credit Risk
      • Market & Liquidity Risk
      • Model Risk
    • Non-Financial Risk
      • Operational Risk
      • Tech Risk
      • Culture & Compliance
    • Risk Support Sector Oversight
    • Risk and Data Analytics
  • Common Supervisory Services
• Corporate Services
  • Legal
  • Communications
  • Finance
  • Human Resources
  • IM-IT

Overview

OSFI delivers on three major Business Lines in fulfilling our mandate to Canadians:

• Regulation and Supervision of Financial Institutions

• Regulation and Supervision of Private Pension Plans

• Provision of Actuarial Services to the Government of Canada

Each Business Line represents one activity that we deliver on through partnership. Every person and group has a role to play, and everyone is responsible for ensuring our success through partnership.

How we partner to deliver

As One Office, we are all partners in delivering on our Business Lines.

Text Description - Business Lines

This graphic shows the interrelationships between sectors within OSFI. Internal Audit and Corporate Services Sector interact with the entire organization. Common Supervisory Services supports Risk Support Sector, Insurance Support Sector, and Deposit-Taking Supervision Sector.

One Office

To achieve a positive, desired impact on financial institutions, pension plans and programs, all areas of OSFI must view themselves as partners whose individual contributions are continuously brought together in order to deliver on our Business Lines. When we see our own work as part of One Activity, because we partner with others outside of our immediate work area, and when we speak with One Voice to our stakeholders, because we communicate effectively with each other, we are working as One Office.

There is no single roadmap toward functioning as One Office. Each OSFI employee has something to contribute, and we need all of these contributions to bring us closer to our goal. Let us continue to build on our reputation as a world-leading prudential regulator and supervisor, and to recognize and encourage all efforts toward working as One Office.

Business Line:
Regulation and Supervision of Financial Institutions

• Setting general expectations for the prudential management of FRFIs through our guidance

• Supervising individual institutions, on a risk basis, against applicable guidance, laws and regulations

• Conducting risk-based assessments and analysis of a FRFI’s activities through supervisory monitoring and reviews

• Intervening early when weaknesses are identified, working with a FRFI’s senior management and the board to take corrective actions

• Being prepared for a range of scenarios if a FRFI’s viability is in serious doubt, including taking control of the institution

Business Line:
Regulation and Supervision of Private Pension Plans

• Supervising federally-regulated private pension plans for the protection of pension plan members and other beneficiaries and promptly intervening where corrective action is necessary

• Setting general expectations through our guidance for the prudential management of private pension plans

• Administering regulatory approvals

Business Line:
Provision of Actuarial Services to the Government of Canada

• Conducting statutory actuarial valuations and providing actuarial advice on federal social insurance programs

• Conducting statutory actuarial valuations and providing actuarial advice on federal public sector insurance and pension programs, including benefits provided to veterans

OSFI-wide Support

• Providing the corporate services, tools and strategic advice required for Office-wide delivery on all Business Lines

• Providing assurance and advice that contributes to the improvement of OSFI internal controls, risk management and governance

Regulation Sector

Text Description - Regulation Sector

This graphic shows the organizational structure for Regulation Sector in the following hierarchy:

Ben Gully
Assistant Superintendent

• Catherine Girouard
  Senior Advisor to Assistant Superintendent
• Natalie Young
  Administrative Coordinator
• Bernard Dupont
  Senior Director
  Capital Division
  • Lisa Peterson
    Managing Director
    Insurance Capital
  • Vacant Position
    Managing Director
    Modeling & Mortgage Insurance
• Amar Munipalle
  Senior Director
  Capital Division
  • Brian Rumas
    Managing Director
    Bank Capital
  • Steve Bevington
    Managing Director
    Bank Capital
• Karen Stothers
  Senior Director
  Central Office
  • Brad Shinn
    Senior Advisor
• Judy Cameron
  Senior Director
  Regulatory Affairs Division
  • Jean-Pierre Girouard
    Managing Director
    Legislative Policy, Interpretations and Compliance
  • Patrick Clermont
    Managing Director
    Approvals
  • Theresa Hinz
    Managing Director
    Prudential Policy and Strategic Policy Liaison
• Tamara DeMos
  Managing Director
  Private Pension Plan Division
• Renée Chen
  Managing Director
  Accounting Policy Division

Organizational Structure & Operations

Regulation Sector's work falls into two categories:

1. Regulation of FRFIs

   The Regulation of Federally Regulated Financial Institutions (FRFIs) involves advancing a regulatory framework of guidance and rules that promotes the adoption by FRFIs 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.

   • Leading the development of the domestic framework for prudential regulation of FRFIs, including through participation on international standard-setting bodies (e.g. Basel Committee on Banking Supervision (BCBS), International Association of Insurance Supervisors (IAIS))

   • Coordination of third-party reviews such as the International Monetary Fund Financial Sector Assessment Program (FSAP) and BCBS Regulatory Consistency Assessment Programme (RCAP)

   • Strategically managing OSFI’s relationships with a range of domestic (i.e. provincial, federal) and international financial sector regulatory and government entities

   • Administering an effective regulatory approvals and new entrant process, and making sound recommendations to the Superintendent and Minister

   • Leading OSFI’s contributions toward the development of federal financial sector and pension policy, legislation, and regulations

   • Supporting crisis management activities through provision of strategic advice, including options for transactions requiring statutory approval, letters for taking control, and communication with other Financial Institutions Supervisory Committee (FISC) partners

   • Contributing toward the training of staff on the application of regulatory guidance and rules

2. Regulation and Supervision of PPPs

   The Regulation and Supervision of Federally Regulated Private Pension Plans (PPPs) involves conducting risk assessments of pension plans and advancing a regulatory framework of guidance and rules that promotes the adoption of sound risk management practices, policies and procedures.

   • Supervising PPPs and promptly intervening where corrective action is necessary

   • Setting general expectations through guidance for the prudential management of PPPs and providing expert advice in changes to the pension regulatory framework

   • Administering regulatory approvals and ensuring appropriate minimum funding requirements are met through actuarial reviews of valuation reports

Mandate and Overview of the Divisions within the Regulation Sector

Accounting Policy Division

Accounting Policy Division (APD) delivers a wide range of expert accounting, auditing and public disclosure advice within OSFI. It is also involved in the transfer of accounting knowledge to the office and contributes to the accounting and assurance standard-setting environment, both international and domestic, where there is a potential impact on OSFI’s strategic objectives.

Capital Division

Capital Division, which consists of a Banking Capital group and an Insurance Capital group, is responsible for developing, maintaining and interpreting prudential capital rules, guidelines and advisories for FRFIs, including deposit-taking institutions, life, property and casualty, and mortgage insurers.

Private Pension Plans Division

Private Pension Plans Division (PPPD) supervises federally regulated PPPs and protects pension plan members and other beneficiaries by developing guidance on risk management and mitigation, assessing whether private pension plans are meeting their funding requirements and managing risks effectively. PPPD intervenes promptly when corrective actions need to be taken.

Regulatory Affairs Division

Regulatory Affairs Division (RAD) is a team of technical and policy experts that is responsible for:

• Developing and implementing prudential and legislative guidance

• Interpreting and applying the federal financial institutions statutes primarily in relation to approvals, compliance and OSFI’s formal intervention tools

• Managing OSFI’s strategic relations with key domestic and international agencies

Central Office

Central Office contributes to the efficient and effective operation of Regulation Sector through the provision of continuous support in the areas of governance, planning, finance and people management. By enhancing the operating effectiveness of key sector processes, reporting, and planning, this allows the rest of Regulation Sector to be focused on their core work to meet OSFI’s mandate.

Corporate Services

Organizational Structure and Operations

Text Description - Organizational Structure and Operations

This graphic shows the organizational structure for Corporate Services Sector in the following hierarchy:

Michelle Doucet
Assistant Superintendent

• Lise Cardinal
  Executive Assistant
• Kirsten McDowell
  Senior Advisor
• Gino Richter
  Senior General Counsel
• Jean Cheng
  Chief Information Officer
• Marc Desautels
  Chief Financial Officer
• Michele Bridges
  Chief Human Resources Officer
• Tracie Noftle
  Senior Director, Communications & Corporate Affairs

Background

Corporate Services Sector provides full service operational support for the Superintendent, the supervision and regulation and Office of the Chief Actuary including human resources, finance and procurement, facilities, security, corporate planning and reporting, communications and engagement, information management, information technology, and legal services.

• Reviews and enhances the suite of corporate services proactively and continually in response to shifts in strategic priorities and changing organizational needs.

• Provides assurance and advice that contributes to the improvement of internal controls, risk management and governance.

Corporate Services partners with all sectors as well as Common Supervisory Services and the Office of the Chief Actuary (OCA) in the design, implementation and evaluation of various enterprise-wide initiatives.

The dedicated divisions listed below work closely with their peers and clients to set and meet high standards for OSFI to manage its own resources, and to effectively deliver on its mandate.

Communications and Corporate Affairs

Communications and Corporate Affairs is comprised of Communications and Engagement (CE), the Strategic Governance Office, ATI and Privacy, Security and Facilities Services (SFS). The CE division provides comprehensive strategic communications support, services and advice. The SFS is responsible for physical security, business continuity planning and all facilities projects, in addition to providing administrative services. The SFS team is located in both Ottawa and Toronto. The Strategic Governance Office provides secretariat support to OSFI senior governance committees and houses the Access to Information and Privacy teams.

Finance & Corporate Planning

Finance and Corporate Planning (F&CP) provides high quality, cost effective, and responsive financial services, procurement services, corporate planning, enterprise risk management and enterprise change management solutions to OSFI management and employees. F&CP allows the Executive Committee and sector management teams to maximize the best use of OSFI’s resources by allocating them commensurate with the risks we see while respecting our overall budgetary limits.

Human Resources

Human Resources provides a full range of services including recruitment, compensation, classification, HR Programs (eg talent Management, leadership development, awards & recognition, official languages), DEI programs, learning and professional development, collective bargaining, labor relations, workplace violence prevention and support to manage performance and disability cases. Because OSFI is a separate employer, the HR team helps balance the needs of the organization for flexibility while respecting applicable government policies and legislation. The HR team is located in both Ottawa and Toronto.

Information Management & Information Technology (IM/IT)

Information Management and Information Technology has six divisions.

• IM/IT Strategic Management is responsible for the development and execution of the IM/IT plans, processes, governance and projects that enable IM/IT to provide well-coordinated and flexible IM/IT systems.

• Infrastructure and Technology Services is responsible for the oversight, maintenance, lifecycle management and projects required to support the computer operations and network infrastructure, in order to provide OSFI with an up-to-date reliable and secure computing environment.

• Application Services is responsible for configuring, maintaining and enhancing software to support business operations.

• Enterprise Information Management specializes in the organizations information and are responsible for building the framework around the collection, use, retention and disposition of our information.

• Client Relationship Management is responsible for facilitating and effective relationship between OSFI work teams and IM/IT, providing a clear understanding of business priorities and better awareness of how technology can support OSFI.

• Cybersecurity is responsible for ensuring OSFI’s cyber security risks are understood and the appropriate controls have been identified and implemented to keep OSFI’s information and systems secure.

Risk Support Sector

Organizational Structure and Operations

Background

The Risk Support Sector was restructured in 2017 to support Supervision and Regulation sectors. This presented an opportunity to evolve risk support at OSFI. The RSS Reset initiative was created to address the developments in the external risk environment such as non-financial risks as well as strengthening its core operations.

Organization Structure

RSS Organization Structure – Sanjiv Talwar, Assistant Superintendent and his Leadership Team:

Text Description - RSS Organization Structure

This graphic shows the organizational structure for RSS in the following hierarchy:

Sanjiv Talwar
Assistant Superintendent

• Sonia Bagnarol
  Special Advisor
• Sharon Grossi
  Executive Assistant
• Angie Radiskovic
  Senior Director, Non-Financial Risk
  • Mohamad Al-Bustami
    Managing Director,
    Technology Risk Division
  • Anie Stuart
    Managing Director,
    Culture & Compliance Risk Division
  • Elspeth Bowler
    Managing Director,
    Operational Risk Division
• Mate Glavota
  Senior Director, Financial Risk
  • Romana Mizdrak
    Managing Director,
    Model Risk Division
  • Robert Dougall
    Managing Director,
    Credit Risk Division
  • Claire Deng
    Managing Director,
    Market & Liquidity Risk Division
• Steven Wright
  Managing Director,
  Risk Surveillance & Sector Oversight
• Andrew Miller
  Chief Data Officer,
  Risk & Data Analytics

Vision

An essential partner that strengthens the regulation and supervision of FIs through progressive and practical risk advisory services.

Mandate

We commit to deliver tailored and horizontal risk analysis, and value-added quality data and advisory services.

Mission

Approach

• We combine established methodologies with innovation, agility, objectivity, and excellence.

Relationships

• We foster collaborative relationships with stakeholder and offer integrated support to partners

People

• We cultivate an inclusive and diverse culture, and continuously develop expertise and leadership competencies

Mandate and Overview of the Divisions within the Risk Support Sector

Financial Risk Group

Provides specialty financial risk expertise to support partners and stakeholders in identifying FRFI-specific and system-wide risks, and assessing financial resilience. Financial risk expertise includes credit, model, and market and liquidity risks. Services include surveillance, risk assessment, benchmarking, communication of expectations and corresponding follow-up on areas of deficiency. Divisions integrate their work efforts across financial and non-financial risk to support supervision and regulation sectors

Credit Risk Division (CRD)

Provides specialty credit risk expertise in identifying FRFI-specific risks, industry-wide risks and/or sector specific trends and developments related to credit risk that may impact a FRFI’s financial resilience. CRD expertise includes both retail and wholesale credit risks inherent in loans, investments and other financial instruments, impacting DTIs, insurers and pension plans.

Market & Liquidity Risk Division (MLRD)

Provides specialty market and liquidity risk expertise in identifying FRFI-specific risks, industry-wide risks and/or sector specific trends and developments related to market and liquidity risks that may impact a FRFI’s financial resilience. MLRD expertise includes market and counterparty risks, treasury and investment risks, and liquidity risks impacting DTIs, insurers and pension plans.

Model Risk Division (MRD)

Provides specialty model risk and capital model assessment expertise in identifying FRFI-specific risks, industry-wide risks and/or sector specific trends and developments related to the use of models (including internal capital models) that may impact a FRFI’s financial and operational resilience. MRD’s expertise includes the application and assessment of quantitative methods and advanced analytics, including Artificial Intelligence and Machine Learning, to financial and non-financial risks affecting FRFIs DTIs, insurers and pension plans, and the governance and oversight of regulatory capital models for DTSS.

Financial Risk Analytics (FRA)

In order to advance FRG’s capacity and capability to supervise our FRFIs and FRPPs, FRA will provide data and analytics support to FRG, in close cooperation with RDA. The team will work collaboratively with other internal stakeholders, consulting frequently to ensure we are delivering analytic tools and specific analysis that meets client needs across OSFI. The team will contribute to aligning FRG with OSFI’s enterprise data strategy and towards the goal of enhancing data literacy and skillsets across our organization. FRA will also engage closely with other similar groups across OSFI to build a data and analytics community of innovation that is both agile and transparent.

Non-Financial Risk Group

Provides specialty non-financial risk expertise to support partners and stakeholders in identifying FRFI-specific and system-wide risks, and assessing operational resilience. Non-Financial risk expertise includes current and emerging operational risks. Services include surveillance, risk assessment, benchmarking, communication of expectations and corresponding follow-up on areas of deficiency. Divisions integrate their work efforts across financial and non-financial risk to support supervision and regulation sectors

Operational Risk Division (ORD)

Provides overarching operational risk management program expertise supporting the assessment of overall operational resilience, identifying FRFI-specific and industry-wide risks. ORD expertise includes assessment of governance and oversight of process and events impacting DTIs, insurers and pension plans.

Culture & Conduct Risk Division (CCRD)

Provides specialty culture and compliance risk expertise in identifying FRFI-specific risks, industry-wide risks and/or sector specific trends and developments related to culture and compliance risks that may impact a FRFI’s financial resilience. CCRD expertise includes culture, people and compliance impacting DTIs, insurers and pension plans.

Technology Risk Division (TRD)

Provides specialty technology and cyber risk expertise in identifying FRFI-specific risks, industry-wide risks and/or sector specific trends and developments related to technology and cyber risks that may impact a FRFI’s operational resilience. TRD expertise includes technology crisis reporting, cyber incident response and in-depth understanding and assessments of threats to any process or function that involves systems, data, infrastructure, networks, cyber security and digital technology impacting DTIs, insurers and pension plans.

Risk Surveillance & Sector Oversight (RSSO)

RSSO provides specialty risk expertise to support partners and stakeholders in identifying FRFI-specific and system-wide risks, and assessing organizational resilience. Risk expertise includes market surveillance, risk identification, risk analysis and risk measurement of new and/or interconnected multifactor risks and risk drivers. In addition, RSSO provides expertise and support in the establishment and maintenance of comprehensive governance and controls in the oversight of RSS activities, to align ensure alignment of work with strategic plans.

• Key initiatives: Integrated Risk Identification and Surveillance (IRIS) was created to coordinate surveillance efforts across all sectors via the Business Risk Committee (BRC) – Macro

Risk and Analytics Division (RDA)

RDA provides specialty data management and analytics expertise to all sectors at OSFI. RDA expertise includes oversight of data collection systems (both structured and unstructured), data quality processes, data workflow automation, BI reporting and the increasing use of advanced analytics. By executing on OSFI’s Enterprise Data Strategy, RDA aims to increase the efficiency and effectiveness of OSFI’s regulatory mandate by transforming data into analytical insights using modern tools and skillsets.

• Key initiatives: OSFI’s enterprise Data Strategy and Implementation Plan

Deposit-Taking Supervision Sector

Overview

Deposit-Taking Supervision Sector (DTSS) has the following responsibilities:

• Developing risk assessments, recommendations and intervention actions for federally regulated deposit-taking institutions (DTIs) through reviews and on-going monitoring.

• Advancing follow-up work to ensure that supervisory and intervention decisions are having the desired effect on Federally Regulated Financial Institutions (FRFI) behavior.

• Developing and coordinating crisis management & recovery planning and stress testing activities

• Determining and communicating the level of the Domestic Stability Buffer (DSB).

Vision

Continue to enhance the supervision of federally regulated deposit-taking institutions by:

• Improving risk assessments, recommendations, intervention decisions and follow-up work to ensure that supervisory and intervention decisions are having the desired effect on DTI behavior

• Improving the proportionality of supervision to reflect the different levels of risk, size and complexity of DTIs in line with the DTSS Risk Tolerance Framework (RTF)

• Focusing on risk by incorporating emerging risks and forward-looking analysis through stress testing (including MST (Macro Stress Test) and RSAT (Risk Scenario Analysis Tool)) in all aspects of supervisory processes (i.e. monitoring, reviews, ad-hoc, etc.)

• Coordinating the assessment of risks and vulnerabilities pertaining to decisions around the level of the DSB

• Advancing the development and coordination of crisis management and planning activities for DTIs and OSFI

• Modernizing and adapting supervisory processes to prepare for new developments such as continued digitization of the financial sector and fintech

• Incorporating elements of Corporate Governance assessments into supervisory work using the outcomes based approach

• Enabling greater focus on risk by improving supervisory processes, tools, data analysis and technology

• Advancing career development plans, training, and rotations

Org Structure

Text Description - DTSS Organizational Structure

This graphic shows the organizational structure for DTSS in the following hierarchy:

Jamey Hubbs
Assistant Superintendent

• Sherri Zielinski
  Executive Assistant
• Brigitte Phaneuf
  Senior Director,
  Small and Medium Size Banking
  • Ardene Wertheim
    Managing Director,
    SMSB Toronto
  • Graham Taylor
    Managing Director,
    SMSB Vancouver
  • Robert Nguyen
    Managing Director,
    SMSB Montreal
• Kathryn Dickson
  Senior Director,
  Systemically Important Banks
  • Mark Porter
    Managing Director,
    BNS Team
  • Winnie LoBaker
    Managing Director,
    BMO Team
  • Darrel Leadbetter
    Managing Director,
    TD Team
  • Lascelle Cummings
    Managing Director,
    RBC Team
  • Narindar Bhavnani
    Managing Director,
    CIBC Team
• Hala Nashmi
  Managing Director,
  Banking Central Office

Text Description - Assistant Superintendent, DTSS

Assistant Superintendent, DTSS

• Banking Central Office
• SIBs
• SMSBs*

*distributed across Vancouver, Toronto and Montreal (incl. NBC team)

• There are three key areas under the Assistant Superintendent – DTSS: Small and Medium Size Banking Group (SMSB), Systemically Important Banking Group (SIBs) and Banking Central Office (BCO)

• SMSB Group has supervisory teams located in Toronto, Montreal (includes the NBC team) and Vancouver. The SIBs Group consists of the following supervisory teams - BMO, BNS, CIBC, RBC and TD

Banking Central Office (BCO) provides support to DTSS in areas such as annual sector-wide planning, Macro Stress Testing, Domestic Stability Buffer, Risk Appetite Framework, Recovery and Resolution Planning, managing the panel process and DTSS reporting

Sector Plan and Initiatives

A key project for DTSS is the Crisis Preparedness (CP) for deposit taking institutions (DTIs). The objective of this project is to improve our readiness in response to a DTI crisis by developing a framework and supporting capabilities. The project deliverable timelines were extended to shift resources and attention to the Crisis Management Working Group in 2020 due to the impact of COVID. CP Working Group meetings and work to complete outstanding project deliverables have resumed in 2021 (including planned training rollout).

Other key DTSS initiatives include:

• Stress-testing work for SMSB and Macro Stress Test for DSIBs

• Domestic Stability Buffer

• Support the development of Capital and Liquidity guidance for SMSB and SIBs, and implementation of OSFI’s Data Strategy

• Develop guidance on recovery planning for SMSB

Industry Landscape and FRFI Risks

[Information was severed in accordance with the Access to Information Act]

On a quarterly basis, Supervisory and RSS teams provide an update on the current assessment of risks for the industry, specific institutions and problem institutions.

Insurance Supervision Sector

Organizational Structure & Operations

Text Description - ISS Organizational Structure

This graphic shows the organizational structure for ISS in the following hierarchy:

Neville Henderson
Assistant Superintendent

• Chris Westfield
  Executive Assistant
• Maria Moutafis*
  Managing Director
  Lead, Common Supervisory Services
  * reports to Chair of CSSC, which rotates between the heads of ISS, DTSS, and RSS
• Jacqueline Friedland
  Senior Director,
  Property & Casualty Insurance Group
• Chris Townsend
  Senior Director,
  Actuarial Division
• Stuart McIlwraith
  Senior Director,
  Life Insurance Group
• Stephane Tardiff
  Managing Director,
  Insurance Supervision Sector
• Paul Skosowski
  Director,
  Supervision Sector
• Andrea McCausland
  Director,
  Central Operating Team

Insurance Supervision Sector (ISS) supervises federally regulated:

• Life insurance companies (including branches, foreign subsidiaries, fraternal and mutual companies) and their subsidiaries

• Property and casualty insurance companies (including branches, foreign subsidiaries, and mutual companies) and their subsidiaries

• Mortgage insurance companies

Property & Casualty Group (PCG)

PCG’s primary focus is on the OSFI mandate of “Protection of Policyholders". This means they assess the ability of property and casualty (P&C) institutions to pay claims (safety, soundness & solvency).

PCG supervise by conducting a risk assessment of significant activities by assessing the level of inherent risk and related mitigation via onsite visits to the institution and monitoring of financial performance of the institution. They also aim to provide early and appropriate intervention to address any areas of significant risk to the institution.

Mortgage Insurance Group (MIG)

MIG contribute to the overall safety and soundness of the Canadian financial system, through the oversight of one of the key elements underpinning housing finance in Canada. MIG is responsible for supervision of the Canadian mortgage insurance industry (which currently comprises a large Crown corporation, two significant private sector insurers, and a dormant company.

In addition to supervisory work, the MIG are also regularly involved in policy-related issues dealing with risk exposure and risk management in mortgage lending and mortgage insurance, working with colleagues in OSFI’s Regulation Sector and Risk Support Sector as well as the Department of Finance and Bank of Canada.

Beyond the focus on mortgage insurance, the MIG are also responsible for supervision of the title insurers operating in Canada. Title insurance is a specialized form of coverage that provides protection to homeowners, to cover the risk of financial loss arising from defects in their title to real property.

Mortgage Insurance Group (MIG)

The Life Insurance Group (LIG) contributes to the overall safety and soundness of Federal Regulated Financial Institutions (FRFIs) through performance of supervisory activities in accordance with the Supervisory Framework.

LIG is made up of two groups:

• Life Insurance Group - Conglomerates (LIG-C)
  The Conglomerate Teams contributes to the overall safety and soundness of the three largest life insurers in Canada (Manulife, SunLife and Canada Life) through risk-based supervisory activities. They maintain accurate risk profiles; assess ratings; build relationships with senior management and Boards; develop knowledge of the institutions and determine compliance with legislation.

• Life Insurance Group - Non Conglomerates (LIG-NC)
  The focus of their work is risk based. This includes analysis of institutions through monitoring and onsite reviews and conducting industry analysis. Work done includes maintaining accurate risk profiles, assessing ratings, maintaining relationship with senior management of FRFIs, developing knowledge of institutions and determining compliance with legislation.

Actuarial Division (AD)

The Actuarial Division (AD) works jointly with all parts of ISS and the Regulations Sector to contribute to OSFI’s mandate of protecting policyholders and creditors of insurance companies from undue loss. The Actuarial Division, ensures appropriate actuarial knowledge, advice and standards are applied to OSFI's regulatory and supervisory functions.

The AD is responsible for managing the division’s relationship with other internal and external stakeholders with respect to OSFI’s domestic insurance strategic analysis and policy development for evolving issues related to insurance products, adequacy of risk provisioning in liabilities and capital, actuarial standards, risk-sensitive modeling techniques, and insurance supervision

Central Operations Team (COT)

The Central Operations Team (COT) in the Insurance Supervision Sector (ISS) acts as the ISS key point of contact for OSFI-wide strategic priorities and manages ISS operational activities, to enable Supervisors to better focus on core supervisory work. The COT provides support to ISS by managing and/or contributing to activities that improve on operational effectiveness for ISS. They are responsible for coordinating the ISS Strategic Plan, Budgets and HR Administration, engagement, change management, annual supervisory planning and ISS-wide performance reporting and communication.

Common Supervisory Services

Overview

OSFI’s Executive Committee (EC) established CSS in January 2016 as part of broader changes to the organizational changes. While the supervisory units have distinct responsibilities, they all need some similar services. As a result, CSS was to provide the following:

• Supervisory technology and tools: To include experienced supervisors who at the time were to support and launch the implementation of the Supervision Tools and Technology Review (STTR) initiative (which became Project Vu).

• Supervisory training: To include experienced supervisors who will work full time on training. While there was a Supervisory Training Initiative, full-time support for supervisory training was a new function.

• Supervisory methods: To include the development of the supervisory framework and support for its implementation. At inception, this included the activities of the former Practices Division but was expected to evolve.

• Supervisory consistency: To include the development and implementation of an oversight process to verify that similar institutions in similar circumstances receive comparable risk ratings and interventions. This was to be a new function.

The first Head of CSS was appointed in October 2016 at the Senior Director level, with an initial focus on establishing the rotational program and staffing levels. The delivery of CSS services commenced in the summer of 2017. The current Head of CSS was appointed on December 1, 2020 at the Managing Director level.

Guiding Principles

The EC memo established the following guiding principles:

• CSS should be active only in areas where it is more efficient to provide services from a common group rather than within each individual supervisory unit.

• CSS should be active only in areas that require supervisory experience and judgment.

• CSS should normally be staffed by experienced supervisors on assignment from one of the supervisory units for a fixed term of two to four years.

• CSS activities should be complementary to, but not overlapping with, those of other units. In particular: HR, IT and related functions belong in Corporate Services, processes for assessing and improving the quality of risk assessments and intervention decisions belong in the supervisory units themselves, and assurance activities (including what has been referred to as “Quality Assurance” in the supervisory units) belong in Internal Audit.

Text Description - CSS, DTSS, ISS, and RSS

This graphic highlights the importance of how CSS’s work impacts DTSS, ISS, and RSS. It shows a central triangle represented as CSS surrounded by three triangles represented by DTSS, ISS, and RSS.

Vision, Mission, and Mandate

Vision

Enhance the effectiveness and everyday life of supervisors in carrying out their risk assessment and supervisory activities.

Mission

Maintain the relevance, strength and appropriateness of OSFI’s supervisory methodology and provide a solid foundation of support to supervisors in the goal of ensuring a consistent interpretation and application of the Supervisory Framework with robust training and technology tools.

Mandate

• Fostering sound risk management and governance practices

  CSS, as the custodian of OSFI’s Supervisory Framework, advances and maintains a Supervisory Framework to support institutional risk assessments through ongoing monitoring, consideration and adopting as appropriate the theoretical foundations and best practice approaches of supervisory systems.

• Supervision and early intervention

  CSS supports the supervision of Federally Regulated Financial Institutions (FRFI’s) by providing support to supervisory risk assessments and actions through technology tools and training in the consideration of the Supervisory Framework implementation of new OSFI guidelines or risks in the environment.

• Environmental scanning linked to safety and soundness of FRFIs

  The CSS monitors rating distributions, trends and supervisory recommendations in order to facilitate a consistent application of the Supervisory Framework by providing supervisors and management with an independent source of benchmarking analytics to support their supervisory activities.

• Taking a balanced approach

  The CSS seeks to balance the application of theoretical and principles based foundations in the Supervisory Framework with a pragmatic, consistent and readily applied operationalization that inappropriately scalable for the size, nature and complexity of FRFI’s.

A review of the CSS Mandate and the responsibilities of each of the four CSS Teams will be completed by the current Head of CSS.

CSS Governance

As established by the EC, the governance of CSS is somewhat unique and complicated. Some of the features include:

• CSS will be led by a single REX manager (initially at the Senior Director level; currently at the Managing Director level).

• CSS will be governed by the heads of the supervisory units, acting as a group to be called the CSS Committee (CSSC). The CSSC will be responsible for determining the Terms of Reference for the committee and its chair, the job description of the head of CSS and for staffing that position. Among the committee’s most important responsibilities will be to determine the number of positions in CSS, which will be drawn from the combined resources of the supervisory units. It will also manage the rotation of supervisory staff into and out of CSS.

• The chair of the CSSC will rotate among the heads of DTSS, ISS and SSG. This rotation will spread the time commitment needed to oversee CSS among three people and reinforce that CSS does not “belong” to any single supervisory unit.

• The head of CSS will report directly to the chair of the CSSC who will provide direction, oversight and evaluation on behalf of the committee.

Effective April 2021, CSS will be rotating to report to the Assistant Superintendent, ISS.

Staffing Model

Similar to the governance model, the CSS staffing model is somewhat complicated and unique within OSFI.

• When created, the then members of Practices Division and those employees who were working full time on STTR were transferred into CSS.

• The original vision for the staffing plan per the EC memo stated that most, if not all, of the positions in CSS will be limited term assignments filled by indeterminate staff who already have permanent positions in one of the supervisory units. Over time, it was anticipated that many successful supervisors would have had a “tour of duty” in CSS as part of their career path. To ensure continuity and knowledge transfer in the functions provided by CSS, the term assignment staffing model was to be phased in over time.

This “rotational model” includes support for staff reintegration into their “home” sector, and the expectation has been that each member of CSS also participate in supervisory work annually. The “rotational model” has presented a number of challenges both from a recruitment perspective and in managing the CSS workplan. The model will be reviewed by the current Head of CSS.

As at March 31, 2021, approximately 54% of the CSS positions are “rotational” or on assignment, with at least 3 of the Director positions expected to rotate essentially within Q1 2021/22 (Tools and Technology, Consistency, and Training). The intent is to backfill these positions through the Talent Management Process, however it will be a significant draw on the supervisory sectors.

Funding Model

As with the governance and staffing model, the funding model for CSS is also complicated and unique.

• Conceptually, CSS does not have any funding of its own.

• Given that CSS was established to provide centralized services to the supervisory sectors where it was more efficient to do so, essentially the three supervision sectors fund CSS each year.

• Supervision sectors may transfer funds to the CSS Cost Centre or directly fund a position or initiative from their cost center. The training budget in the training cost center is an example of a direct allocation.

• The Supervision Career Management Program (SCMP) always had its own budget as part of supervision and with the transfer to the SCMP into CSS in April 2020, the budget for this was also transferred.

• Currently, CSS administers six cost centers to support its operations, however with the completion of the Vu Project, the Vu Build Cost Centre will be eliminated shortly

• Formal projects (i.e. Project Vu) would be funded directly from the OSFI budget and would be subject to Treasury Board requirements.

Office of the Chief Actuary

Overview

Mission & Mandate

The mandate of the Office of the Chief Actuary (OCA) is to conduct statutory actuarial valuations of the CPP, Old Age Security (OAS) program, federal public sector employee pension and insurance plans, Employment Insurance (EI) premium rate, and the Canada Student Loans Program (CSLP). These valuations estimate the financial status of these plans and programs as required by legislation.

The OCA also provides the relevant government departments, including the executive arm of provincial and territorial governments who are co-stewards of the CPP, with actuarial advice on the design funding and administration of these plans. The plans under the responsibility of the OCA have assets of over $650 billion. OCA clients include:

• Employment and Social Development Canada (ESDC)

• Finance, Treasury Board Secretariat (TBS)

• Public Services and Procurement Canada (PSPC)

• Department of National Defense (DND)

• Veterans Affairs Canada (VAC)

• Royal Canadian Mounted Police (RCMP)

• Justice Canada and Canada Employment Insurance Commission

In 2020, the management team of the OCA completed a vision exercise. The vision and related guiding principles were presented to OCA staff and are aimed at guiding us in our future endeavors. OCA’s guiding principles are aligned with OSFI values.

Accountability Framework

The OCA was established within the Office of the Superintendent of Financial Institutions as an independent unit. By being outside of the departments that use its services, the Chief Actuary can exercise independent and impartial professional judgement in discharging its mandate. Although the Chief Actuary reports to the Superintendent, the accountability framework of the OCA makes it clear that the Chief Actuary is solely responsible for content and actuarial opinions in reports prepared by the OCA.

Funding of the OCA

OCA provides both statutory and non-statutory services that are funded either by OSFI’s Appropriations, Client’s Appropriations or a Dedicated Fund. Funding through Client Appropriations and Dedicated Funds is usually provided for in MOUs with clients. The total OCA budget for 2021-2022 is $12.1M with 74% allocated to statutory services and 26% allocated to non-statutory services.

OCA does not formally have authority to provide non-statutory services to other departments and agencies – despite the OCA already providing such services via MOUs to certain clients (mainly Veterans Affairs Canada and the Treasury Board Secretariat for work related to the Public Accounts of Canada). Both OCA and OSFI are aware of this issue, but recognize it as a low risk situation.

Position within OSFI

Historically, the OCA had not been directly represented on the Executive Committee (EC) and the responsibility to ensure that the OCA was considered in EC decisions informally rested with the Superintendent. In practice, it meant that the OCA was not considered (or at least not consulted) in a variety of decisions.

Since March 2021, the Chief Actuary now participates in all of the activities of the Executive Committee on a test-and-lean basis until the end of June 2021. Including the Chief Actuary as part of this forum acknowledges her role as a decision-making partner on the issues that affect our common operating environment. It is expected that this arrangement will be refined and formalized with the new Superintendent.

The OCA is also represented in the membership of four of the five OSFI’s governance committees (Data and Technology Committee, People and Culture Committee, Business Risk Committee, and Operating Committee). Due to the size and management team composition of the OCA, the representation on these committees include individuals at the One Director’s level.

In 2021, for the first time, the OCA prepared a Unit Plan and will report its progress towards this Plan through the Strategic Plan Implementation Report and the Strategic Plan Implementation Management Report.

Workforce

Office Structure

The OCA is composed of two Sections; one Section responsible for the work related to the social security programs (CPP, OAS, CSL, EI) and one Section responsible for the work related to the public sector pension and insurance programs. Each Section has three Directors leading teams of 4-7 people. The 3 Directors in the social security Section report to the Chief Actuary while the 3 Directors in the public sector pension and insurance programs Section report to a Managing Director who reports to the Chief Actuary.

Current Workforce

OCA’s workforce is made up of two administrative coordinators and 41 actuarial professionals most of whom have achieved Fellowship (17) or Associateship (14) designations with the Canadian Institute of Actuaries and/or the Society of Actuaries. Others continue to write exams to achieve their Associateship and some of those with Associateship are working toward their Fellowship designation. The OCA supports its employees in the achievement of actuarial designations through the Actuarial Study Time Policy.

The current Chief Actuary was appointed in April 2019 and, as a result of a process to staff Directors’ positions, 3 Directors were also appointed in 2019. Further, a Managing Director’s position was created and staffed in the summer of 2019. One Director is retiring in May 2021 at which time a new Director will be appointed.

Development Program for Actuaries

The OCA Development Program for Actuaries (DPA) was put in place in 2016 with the objective of developing high-caliber individuals through challenging work assignments, job coaching and a combination of formal and informal training which sharpens the knowledge, skills and competencies of individuals in order for them to move to higher working level positions (levels RE04 to RE07). All actuarial professionals at the RE levels had the opportunity to enter the DPA through a competitive process. All new hires since 2016 are entered in the DPA. More than 25 promotions have been made since the DPA was launched.

The current Chief Actuary was appointed in April2019 and, as a result of a process to staff Directors’ positions, 3 Directors were also appointed in 2019. Further, a Managing Director’s position was created and staffed in the summer of 2019. One Director is retiring in May 2021 at which time a new Director will be appointed.

Work Products

Work Cycles

The OCA prepares statutory actuarial reports for 8 programs on a triennial cycle and for EI on an annual cycle. In addition, the OCA prepares annually 12 actuarial reports for Public Accounts purposes, including one report which covers the 6 federal public sector pension plans. The OCA also provides assistance to federal and provincial Ministers of Finance during their regular triennial review of the CPP.

Some of the work of the OCA is also non-cyclical, such as: preparation of cost estimates for potential changes to the programs, preparation of projections of costs for budget purposes, preparation of actuarial studies, presentations to different stakeholders nationally and internationally, etc.

External Controls

Independent Peer Review of the CPP

• As part of its policy of ensuring that it is providing sound and relevant actuarial advice to Members of Parliament and to the Canadian population, the OCA commissions external peer reviews of its Actuarial Reports on the Canada Pension Plan. The external peer review is intended to ensure that the actuarial reports meet high professional standards, and are based on reasonable methods and assumptions.

• The external peer review process has been in place since 1999 and has generated a number of valuable recommendations that have been a source for continued improvements in the quality and transparency of actuarial reports. Each independent review brings fresh perspectives to continue to improve the quality of our work and strengthen the independence of our office.

• To ensure impartiality and to enhance the credibility of the peer review process, the globally recognized social security experts at the United Kingdom Government Actuary's Department (GAD) selects the panel members and provides an independent opinion on the work done by the reviewers.

• The data, assumptions and methodologies used for the CPP reports are also used for other programs falling under the responsibility of the OCA. As such, the findings and recommendations from the external peer review process are also applicable to other programs under the responsibility of the OCA.

Auditor General Audit

• In order to audit the Government of Canada’s liabilities related to pensions, severance benefits, student loans, health and dental post-retirement benefits, workers’ compensation benefits and Veterans’ future benefits shown in Public Accounts, the Auditor General uses the actuarial work of OCA as audit evidence. As part of their audit work, the Office of the Auditor General (OAG) reviews the data, methods and assumptions used by the OCA in their actuarial reports for Public Accounts purposes. Comments and recommendations put forward by the OAG are reflected in future actuarial reports, as appropriate.

Professional Standards

• Actuarial advice given and actuarial reports prepared by the OCA are prepared in accordance with accepted actuarial practice in Canada. In particular, the methodology and assumptions selected must comply with the Standards of Practice of the Canadian Institute of Actuaries. All Fellows and Associates of the Canadian Institute of Actuaries (F/ACIA) must strictly adhere to the CIA Rules of Professional Conduct.

Internal Controls

In addition to the external controls described above, the OCA has internal controls to ensure the accuracy and relevance of its actuarial advice. The statutory actuarial reports are signed by at least two OCA actuaries who are FCIAs to enhance the internal quality control process. A formal Quality Assurance (QA) exercise was also conducted in 2015/16 for all programs under the responsibility of the OCA which covered areas such as context of the requests, data validation, models, methodology and assumptions and communication of results. Results were shared with client departments and improvements were discussed for areas identified as weaker. A revised QA process is currently being developed and will be implemented in 2021/22.

Issues for the OCA

Recruiting and Retention

To operate effectively, the OCA requires staff with technical, actuarial and superior communication (written and verbal) skills. In recent years, it has been increasingly challenging to attract candidates with those qualifications to Ottawa. In addition, there are very few actuaries with experience with social security programs and actuaries with experience with pensions are becoming more rare with the decline in defined benefit pension plans. Finally, the skill sets of OCA’s employees make them attractive candidates, especially for certain groups at OSFI. Careful attention needs to be paid to the career opportunities offered at the OCA to avoid retention issues. Given the rarity of experienced actuaries in our fields of expertise, the OCA must hire employees at lower levels and assure their development. OCA’s budget for 21-22 includes 43 FTEs; currently the OCA has 40 positions filled. The three vacant positions are expected to be filled in the summer of 2021.

To address these challenges, a number of initiatives have been launched in the last few years:

• The DPA was changed to relax some hard experience and education criteria and to extend the program to the RE-07 level. These changes will give greater flexibility to the OCA in the hiring of candidates in a difficult hiring environment and will also allow the OCA to offer further opportunities for career advancement for RE-06 employees given the limited number of management positions.

• Engagement sessions were held with all employees at the RE levels in an effort to seek employee input to inform OCA on how they can best support REs. As a result, an action plan was developed to address the key points identified in the sessions. Most actions from the action plan were implemented in 2020.

• OCA is taking part in the pilot project for the Talent Management for REs

Adequate Level of Staffing

The economic, demographic and technological environments in which the OCA operates are becoming increasingly complex and sophisticated. As such, the OCA needs to have adequate staffing to not only fulfill its mandate but also keep pace with the environments and the various stakeholders. Employees need to have sufficient time to develop and expand their knowledge and sufficient time also need to be allocated to documentation and continuous improvements of tools and processes. It is important that OCA clients understand and support the level of staffing required to fulfil its mandate and work towards its vision.

Succession Planning

A number of OCA employees have significant program-specific knowledge which is somewhat isolated. 3 of the 6 Directors are within 5 years of retirement. Key positions need to be identified and a plan for succession needs to be in place. Sharing of knowledge needs to be prioritized. Leadership training, at all levels, is needed.

A number of actions have been taken to address the situation:

• All but one OCA executives have completed or are going through the Leadership Development Program and executives have access to coaching services.

• Two RE-06 employees are currently enrolled in the Aspiring Director program offered by the Canada School of Public Service.

• Another two RE-06 employees are enrolled in OSFI’s Management Essentials Program and future opportunities for leadership training will be aligned with the DPA.

Technology

OCA uses different tools than the rest of OSFI and some of these tools are unique. The workforce is also changing and it is becoming difficult to find employees with actuarial skills that also have strong programming skills. There is therefore a general need for documentation, training material and knowledge sharing. The OCA is currently engaging with OSFI IM/IT to benefit from their expertise.

Data

The OCA collects a large amount of data in order to perform the required analysis. Data security remains an ongoing issue for the OCA and the OCA is continuously engaging with OSFI IM/IT in this respect. The OCA is always looking at improving its data analytics capabilities and has engaged with the Risk & Data Analytics group.

Internal Audit

Overview

Mandate

The role of Internal Audit (IA) is to add value by assessing and contributing to the improvement of risk management, control and governance processes in accordance with the Treasury Board (TB) Policy on Internal Audit.

IA provides independent and objective assessments through assurance and consulting services to help OSFI management efficiently and effectively achieve its business objectives and fulfill OSFI’s mandate. The IA mandate is posted internally and can be found in the link provided above.

2021-2023 Internal Audit Plan

Internal Audit prepares an annual multi-year risk based plan (the Plan) in accordance with the Treasury Board Policy on Internal Audit and the Institute of Internal Auditors’ International Professional Practices Framework.

The Plan outlines the IA activities for the fiscal year 2021-22 and provides a comprehensive inventory for potential audits for future years. It is designed to ensure IA resources are allocated effectively to support OSFI in achieving its strategic priorities. The Plan is posted internally.

Strategy, Risk and Performance

OSFI Strategic Plan

2019-2022 OSFI Strategic Plan

Why a Strategic Plan?

It charts a path for our future that builds on the many achievements and learnings of the past thirty years. It will help focus our efforts and resources as we move forward and further strengthen our ability to meet our mandate. This plan charts a path for our future. It sets priorities, focuses our work toward common goals and identifies intended outcomes/results; in so doing, the plan guides sector planning.

3 Year Cycle; Sector Plans

The current OSFI Strategic Plan sets the organization's focus three years at a time. This is the public-facing plan that we commit to our stakeholders.

Internally, each sector also creates its own Sector Plans which lays out specific deliverables for a specific year within the OSFI Strategic Plan and also looks forward the next 3 years. Each Sector Plan explains the work sectors do or plan to do over the next three years towards achieving the goals in the Strategic Plan. Sector Plans will also help us assess both organizational and individual performance.

For the 2021-2022 fiscal year, it still falls within the 2019-2022 OSFI Strategic Plan. The Sector Plan defines deliverables for the fiscal year 2021-2022, but also looks forward 3 years 2021-22 to 2023-24.

Interlinkages

The OSFI Strategic Plan, Sector Plans, and Financial Plans are all linked and derive from the overall OSFI Strategic Plan. In particular, through the Strategic Plan we set out the overall direction for OSFI, then ask ourselves what resources we would need to realize this. The outcome impacts our budgetary envelopes each year.

The 2019-2022 OSFI Strategic Plan

The stakeholder-facing 2019-2022 OSFI Strategic Plan outlines our 4 main goals:

Text Description - OSFI Strategic Plan

Our Mandate

Protecting depositors, policyholders, financial institution creditors and pension plan members, while allowing financial institutions to compete and take reasonable risks. Providing actuarial valuation and advisory services to the Government of Canada.

Our Vision

Building OSFI for today and tomorrow: preserving confidence, ever vigilant, always improving

Achieved Through What We Do

Supported by people, data and infrastructure, we regulate and supervise federally regulated financial institutions and private pension plans and we provide actuarial valuation and advisory services to the Government of Canada.

Supported By Our Three-Year Goals

1. Federally regulated financial institution and pension plan preparedness and resilience to financial risks is improved, both in normal conditions and in the next financial stress event.
2. Federally regulated financial institutions and pension plans are better prepared to identify and develop resilience to non-financial risks before they negatively affect their financial condition.
3. OSFI's agility and operational effectiveness are improved.
4. Support from Canadians and cooperation from the financial industry are preserved.

OSFI Achievements Against Priorities in the Past Year

SPIRE & SPIMR

In order to update our employees on the status of our Strategic Plan and to ensure good governance and project management over key initiatives, we produce the following internal reports:

SPIRE: Strategic Plan Implementation Report - semi-annual high level, visually interactive report to all employees reporting on the progress of all sector plans items

SPIMR: Strategic Plan Implementation Monitoring Report - quarterly report that focuses on key projects and initiatives with updates on milestones. Reported to the Operating Committee to manage project risk, and provided to the Executive Committee for information and awareness.

The image below shows how SPIRE and SPIMR fit within the overall ERM Vision (note: ERM is currently in development).

Text Description - ERM Vision

This graphic shows how the future ERM vision would contain the following items:

• The SPIRE, which outlines what we are doing
• The SPIMR, which outlines if we are executing major initiatives
• OSFI Performance Report, which outlines if we are performing and effective
• Enterprise Risk Indicators, which outlines if we are managing risks to OSFI

Tangentially, there is also the Emerging Risk Committee report, which outlines if we are managing risks to FRFIs

Risk & Performance

Enterprise Risk Management

Background

• The new ERM vision and approach was endorsed by EC in December 2019 and thereafter presented to the co-Chairs of OSFI’s senior management committees (SMCs) in February and March 2020.

• Following a pause of this work through most of 2020-21 as a result of the pandemic and the suspension of the work of the SMCs, implementation of the new ERM approach began in late 2020-21.

• Between December 2020 and April 2021, presentations on the new ERM approach and next steps were delivered to the OC, AC, Committee of Co-Chairs, PCC and DTC to inform committee members about the new ERM Framework and the next steps with implementation.

• In 2021-22, the goal is to build out the full ERM framework based on the endorsed ERM vision and approach, while leveraging OSFI’s corporate governance construct.

3 year Implementation Plan

2021-22 Milestones

2021-22 will be a transition/test phase. Implementation work will focus on the following:

Risk Lens

• To better integrate risk considerations into strategic planning and governance /decision-making, the Operating Committee (OC) developed the Risk Lens and Risk Tolerances, which EC then approved.

• It was understood that the Risk Lens would serve as the foundation of the new ERM Framework.

• For reference, the graphic below shows the EC's current oversight mapping over specific risk categories.

Text Description - Risk Categories

This graphic shows the various risks the EC and Governance Committees oversee:

• The Executive Committee has oversight over Financial Risk, Human Capital Risk, Strategic Risk
• The Operating Committee has oversight over Financial Risk, Technology Risk, Operational Risk, Legal & Compliance Risk, and Stakeholder Confidence Risk.
• Data & Technology Committee has oversight over Technology Risk.
• People & Culture Committee has oversight over Human Capital Risk
• Common Supervisory Services has oversight over Supervisory Risk
• Business Risk Committee has oversight over Supervisory Risk, Strategic Risk, and Regulatory Framework Risk

ERM Vision

While the ERM is still in development, the SPIRE, SPIMR and OSFI Performance Report (currently operational and available) feed into the overall ERM vision. The Enterprise Risk Indicators (ERI) may be a part of the ERM suite of tools in the future.

Text Description - ERM Vision

This graphic shows how the future ERM vision would contain the following items:

• The SPIRE, which outlines what we are doing
• The SPIMR, which outlines if we are executing major initiatives
• OSFI Performance Report, which outlines if we are performing and effective
• Enterprise Risk Indicators, which outlines if we are managing risks to OSFI

Tangentially, there is also the Emerging Risk Committee report, which outlines if we are managing risks to FRFIs

Next Steps

• Incorporate EC feedback into implementation approach and finalize plans

• Establish SMC working group and begin engaging members in work included in forward agenda

• Complete development of a change management strategy

• Hire consultant to support work

Regulatory Framework

FRFIs

Supervision

Supervision of Deposit-Taking Institutions

Supervisory Responsibilities

DTSS regulates and supervises deposit-taking institutions (DTIs) including banks, foreign bank branches, trust and loan companies, and cooperatives.

The federally regulated deposit-taking industry in Canada comprises of six large domestic banks designated as domestic systemically important banks (DSIBs), four mid-tier institutions, and many smaller institutions. Two of the larger banks (Royal Bank of Canada and Toronto Dominion Bank) have been designated global systemically important by the Financial Stability Board.

The six largest banks account for 90 percent of total assets held by federally regulated deposit-taking institutions. Their diversified business lines extend beyond traditional deposit-taking and lending activities to trading, investment banking, wealth management and insurance. In addition to their primary domestic focus, these large banks operate in many other countries.

Small and medium-sized institutions account for the other ten percent of assets. These institutions pursue various market and business strategies such as mortgage lending, commercial real estate lending and credit card lending.

We closely monitor economic, financial and non-financial risks facing deposit-taking institutions, including system-wide or sector developments that could have a negative impact on their financial condition.

Executing Supervisory Work

OSFI has a robust supervisory and early intervention regime, the main pillar of which is the risk-based Supervisory Framework. Key supervisory activities involve:

• Planning supervisory work

• Executing supervisory work and updating the risk profile (monitoring FRFI conditions and conducting review work)

• Reporting and Intervention

The level and intensity of the supervisory work is risk-based and is further guided by the DTSS Risk Tolerance Framework.

Coordination with external partners

When the risks of a FRFI are elevated that impact the financial viability and solvency, intervention actions are required. The Guide to Intervention for DTIs provides additional guidance that OSFI and the Canada Deposit Insurance Corporation (CDIC) can take. Intervention measures may involve increased monitoring, special examinations or, in extreme adverse scenarios, taking control of or winding-up an institution, among other resolution options.

The OSFI-CDIC Strategic Alliance Agreement provides a framework for OSFI and CDIC to coordinate their activities, promote consultation and facilitate the exchange of information with the objective of enhancing the ability of CDIC and OSFI to carry out their respective mandates efficiently and effectively.

Every two years, OSFI’s supervisory stress test program for DSIBs, Macro Stress Test (MST), is run in partnership with the Bank of Canada. The MST is a comprehensive forward-looking view of how banks expect a severe yet plausible stress scenario to unfold, facilitating the formation of supervisory and policy insights and responses. Work is currently being done to extend this program to select small and medium-sized institutions.

Effective co-operation and information sharing, in the form of Supervisory Colleges, play a key role in enhanced supervision, particularly for banks that operate globally. OSFI hosts Supervisory Colleges for the DSIBs every 12-18 months. In addition, meetings for crisis management group are co-hosted by OSFI and CDIC which take place every 12-18 months. Supervisors are also invited to participate in Supervisory Colleges hosted by home regulators.

Supervision of Insurance Companies

Supervisory Responsibilities

ISS supervises federally regulated life insurance companies (including branches, foreign subsidiaries, fraternal and mutual companies) and their subsidiaries; federally regulated property and casualty insurance companies (including branches, foreign subsidiaries, and mutual companies) and their subsidiaries; and mortgage insurance companies. The Actuarial Division, ensures appropriate actuarial knowledge, advice and standards are applied to OSFI's regulatory and supervisory functions.

Executing Supervisory Work

Similar to DTIs, Insurance Company supervision uses OSFI's supervisory and early intervention regime, the main pillar of which is the risk-based Supervisory Framework.

Coordination with external partners

See Guide to Intervention (below) for more details.

Composite Risk Rating and Assessment Criteria

OSFI shares its assessment of an institution's overall risk profile or "Composite Risk Rating" ("CRR") with the institution. The determination of the CRR and underlying ratings are guided by Assessment Criteria, which were developed when the Framework was first introduced. These criteria are in the process of being updated to reflect the enhancements made to the Supervisory Framework in 2010 and other developments. These criteria are not required standards, but are used to guide supervisory assessments in individual cases.

Supervisory Framework

Overview

OSFI’s Supervisory Framework describes the principles, concepts, and core process that OSFI uses to guide its supervision of federally regulated financial institutions (FRFIs). These principles, concepts, and core process apply to all FRFIs in Canada, irrespective of their size, and accommodate the unique aspects of the deposit-taking, life insurance, and property and casualty insurance sectors. Supervision of pension plans is guided by a similar but separate Framework.

Supervision involves assessing the safety and soundness of FRFIs, providing feedback as appropriate, and using powers for timely intervention where necessary. Its primary goal is to safeguard depositors and policyholders from loss. As such, the focus of supervisory work is determining the impact of current and potential future events, both internal to a FRFI and from its external environment, on the risk profile of the FRFI.

The Supervisory Framework is designed to assist OSFI in meeting its statutory obligations set out in the Office of the Superintendent of Financial Institutions Act (OSFI Act) and other governing legislation regarding the supervision of FRFIs. These obligations are broad and overarching, and to meet them in practice requires detailed and consistent standards and criteria for supervising FRFIs.

History

Since OSFI’s Supervisory Framework was first introduced in 1999, significant developments in the financial services industry changed the nature of the risks and risk management of financial institutions. For example, product sophistication has increased, globalization has caused risks to become more systemic, and financial institutions have experienced multiple and severe stresses to their solvency and liquidity. Meanwhile, international standards and requirements for supervising financial institutions have also been strengthened driven by the global financial crisis of 2008.

The updates to the Supervisory Framework in 2010 reflect enhancements OSFI made to address such changes, and the experience gained from applying the 1999 Framework over the prior ten years. The enhancements continued to make OSFI’s risk-based supervision as dynamic and forward-looking as possible and helped ensure that OSFI could respond effectively to changes in the Canadian and international financial sectors, now and in the future.

Looking Forward

In January 2021, the CSSC approved a multi-year comprehensive review of OSFI’s Supervisory Framework. Fiscal 2021-22 will be the start of a multi-year comprehensive review of OSFI’s Supervisory Framework. While the Framework has served us well, this comprehensive review will look at all aspects and components, including, but not limited to, incorporating non-financial risks, supervisory technology (SupTech) initiatives, and increased data capabilities to support supervisors and the Office in fulfilling its mandate. A detailed plan is currently being developed by CSS for approval by the CSSC.

Guide to Intervention

• Guide to Intervention for Federally Regulated Deposit-Taking Institutions

• Guide to Intervention for Federally Regulated Property and Casualty Insurance Companies

• Guide to Intervention for Federally Regulated Life Insurance Companies

Federally Regulated Deposit-Taking Institutions

The Intervention Process

The objective of the intervention process is to enable OSFI and CDIC (where CDIC member institutions are involved) to identify areas of concern at an early stage and intervene effectively so as to minimize losses to depositors for OSFI and to minimize the exposure of CDIC to loss. The financial institutions’ statutes provide a wide range of discretionary intervention powers that allow OSFI and CDIC to intervene to address concerns that may arise with federally-regulated deposit-taking institutions. All assessments made throughout the intervention process consider the unique circumstances of the financial institution including: nature, scope, complexity and risk profile.

The roles of OSFI and CDIC

OSFI has primary responsibility for regulating and supervising federally regulated deposit-taking institutions. In exercising this responsibility, OSFI conducts risk-based assessments of the safety and soundness of these institutions. There are no regular supervisory interactions between CDIC and federal member institutions in the normal course of business as CDIC normally works through OSFI to address any concerns it may have about individual institutions. CDIC administers its Act and by-laws as required under its legislated mandate and exercises its discretion in dealing with problem member institutions. CDIC will monitor member institutions and take necessary action depending on the condition of the member institutions as assessed in accordance with CDIC’s powers and objects.

Federally Regulated Property and Casualty Insurance Companies

The Intervention Process

The objective of the intervention process is to enable the Office of the Superintendent of Financial Institutions (OSFI) to identify areas of concern at an early stage and intervene effectively so as to allow OSFI to minimize losses to policyholders and other creditors of federally regulated property and casualty insurance companies (companies or company). The Insurance Companies Act of Canada provides a wide range of discretionary intervention powers that allow OSFI to intervene to address any concerns that should arise with a company. All assessments made throughout the intervention process consider the unique circumstances of the company including its nature, scope, complexity and risk profile.

The roles of OSFI and PACICC

OSFI has primary responsibility for regulating and supervising companies. In exercising this responsibility, OSFI conducts risk-based assessments of the safety and soundness of these companies. The mission of the Property and Casualty Insurance Compensation Corporation (PACICC) is to protect eligible policyholders from undue financial loss in the event that a member insurer becomes insolvent. There are no regular supervisory interactions between PACICC and member companies. PACICC works to minimize the costs of insurer insolvencies and seeks to maintain a high level of consumer and business confidence in Canada's P&C insurance industry through the financial protection it provides to policyholders.

Federally Regulated Life Insurance Companies

The Intervention Process

The objective of the intervention process is to enable OSFI to identify areas of concern at an early stage and intervene effectively so as to allow OSFI to minimize losses to policy holders and other creditors of federally-regulated life insurance companies (“companies”). Assuris' mission is to mitigate the impact on Canadian policyholders of the financial failure of a life insurance company. Assuris works in partnership with regulators on any necessary interventions, seeking to both minimize long-term costs and preserve consumer perceptions of industry strength. The Insurance Companies Act of Canada provides a wide range of discretionary intervention powers that allow OSFI to intervene to address concerns that may arise with companies. All assessments made throughout the intervention process consider the unique circumstances of the company including: nature, scope, complexity and risk profile.

The roles of OSFI and Assuris

OSFI has primary responsibility for regulating and supervising companies. In exercising this responsibility, OSFI conducts risk-based assessments of the safety and soundness of these companies. There are no regular supervisory interactions between Assuris and member companies. Assuris' role in the intervention process is to protect policyholders by minimizing loss of benefits and ensuring a quick transfer of their policies to a solvent company where their benefits will continue to be honoured. Assuris is funded by the life insurance industry and endorsed by the Government of Canada. Assuris works in partnership with OSFI in the intervention process. Assuris performs independent financial analysis of its member companies and meets regularly with OSFI to discuss questions relating to their analysis. In addition, OSFI provides Assuris with information on companies that are of heightened concern to OSFI (ie. companies at stage 1 and above.)

Guidelines, Advisories, Rulings

While the regulation of FRFIs is largely based on FRFI statutes and their associated regulations, OSFI also issues various forms of guidance, including:

• Guidelines, which set regulatory expectations to govern industry activities and behaviour. These include solvency (e.g., capital adequacy), prudential and accounting standards;

• Advisories, which clarify the position of OSFI regarding certain policy issues or describe how OSFI generally administers and interprets provisions of legislation, regulations or guidelines;

• Rulings, which describe how OSFI has applied or interpreted provisions of legislation, regulations or guidelines in a specific case; and

• Letters, which highlight timely issues or concerns and articulate OSFI expectations.

These forms of guidance, along with the governing statutes provide the rules by which existing FRFIs must conduct their business. They also establish the criteria that must be met by entities that propose to enter the Canadian market.

Approvals

Overview

The FRFI statutes require that a FRFI obtain the Superintendent and/or the Minister of Finance’s approval prior to entering into certain transactions, establishing an institution, or engaging in certain activities. The Approvals Team’s mandate is to manage, analyze, and make recommendations in regards to these approval requests, as well as administer/provide advice on the application of OSFI’s legislative intervention tools.

FRFIs that are required to obtain an approval consist of both Deposit Taking Institutions (DTIs), which are required to obtain approval under the Bank Act or Trust and Loan Companies Act, and Insurance companies, which are required to obtain approval under the Insurance Companies Act.

If a FRFI enters into a transaction prior to obtaining the appropriate approval, it requires a post-approval and can be subject to an Administrative Monetary Penalty (AMP). In some cases, non-FRFIs may also require a legislative approval.

In considering approvals, the Superintendent may take into account any relevant prudential considerations, national security, and Canada’s international relations and legal obligations. Further, the Superintendent may impose any terms and conditions or require an undertaking when granting an approval and may also revoke, suspend or amend an approval, or apply for a court order in the case of non-compliance of a term, condition or undertaking.

For example, Superintendent Approvals include all related-party transactions requiring approval, share redemptions and acquisitions of unregulated lenders. Such approvals tend to be exclusively “prudential” in nature, and are without significant public policy considerations.

Under the statutes, there are also a range of Ministerial Approvals. In general, these cover major items that shape the financial services sector and that have significant policy implications, such as new entry (e.g., incorporations, or creation of a foreign bank branch), and major mergers/acquisitions.

In the case of both Ministerial and Superintendent Approvals, OSFI is the single point of entry for processing all applications for approval and assessing and recommending thereon. This is a well-developed process, involving relevant groups throughout OSFI, led by the Approvals Team in the Regulation Sector.

Sign-offs on all approvals, whether direct (i.e., for Superintendent approvals) or indirect (i.e., Minister Approvals/recommendations to the Minister), has been delegated to the Assistant Superintendent, Regulation Sector. As Superintendent, you will be apprised of material transactions (including situations where OSFI concludes that a transaction should not proceed on prudential grounds) as they proceed.

The Approvals Process

1. OSFI receives an application and it is entered into Approvals Case Management System (CMS). The Approvals Team performs a review of the application to ensure all the relevant information is contained as outlined in the transaction instructions on OSFI’s external website.

2. Once all information is provided (including OSFI Supervision’s transmittal regarding the transaction) and the applicant has responded to all of OSFI’s follow up questions, the application is deemed to be complete, and is receipted. Once an Application Receipt is provided to the applicant, the clock begins with respect to OSFI service standards.

3. Once the Approvals Team completes its review, the Case Officer will prepare a recommendation memo containing timing considerations, material facts, analyses, and a recommendation to approve the application. In some cases, conditions may be placed on an approval.

4. Once the internal review cycle is completed, the Approvals Team provides its recommendation to the Assistant Superintendent, Regulation Sector or the Minister of Finance. Once approved, the Case Officer will prepare and send a notice informing the applicant that the approval has been granted.

New Entry Process

All applications seeking a bank, federal trust, loan and insurance company license are subject to the following four phases of review:

1. Pre-application: This includes the review of a limited set of material (e.g., proposed business plan). OSFI concludes on its view of the material risks and communicates this to the applicant.

2. Formal Application for Ministerial Approval: The applicant publishes its intent to obtain a federal license. OSFI conducts a review of the comprehensive set of application material including proposed policies and makes a recommendation to the Minister of Finance for Letters Patent.

3. Pre-order to Commence Business: OSFI generally performs a pre-commencement onsite review (this does not apply to new entry for insurance companies). The Approvals Team makes a recommendation to the Superintendent for Order to Commence Business.

4. OSFI Supervision and Regulation: The applicant commences operations as a FRFI and is subject to OSFI’s ongoing supervision.

Securities Administration and Approvals Reporting (SAAR) Team

• Reviews and approves Trust Agreements(Insurance companies) and Deposit Agreements (Banks) for new foreign applicants(Branches) and for branches changing trustee or depository

• Administers the process for obtaining Supervision approval for the release and vesting of assets held in:

  • Vested Asset Accounts for P&C and Life Insurance Branches
  • Foreign Bank Branch Deposit accounts for foreign bank branches

• Reviews and accepts Letters of Credit(and all subsequent amendments) before they may used as collateral for capital credit purposes

• Administers Reinsurance Security Agreements (RSAs) – to ensure domestic insurance companies are eligible for a capital/asset credit for unregistered reinsurance if theyhold collateral in Canada

• Provides assistance to FRFIs regarding the processes for vesting of assets

• Manages relationship with trustees and ensures they are compliant with OSFI’s rules and regulations

Private Pension Plans

PPPs: Regulation & Supervision

The Pension Benefits Standards Act, 1985 (PBSA) requires plan administrators to seek approval from the Superintendent for different types of transactions affecting pension plans, including plan registrations and terminations, asset transfers, refunds of surplus, and benefit reductions. Ministerial approval is not required for these pension plan approvals. However, a mechanism introduced in the PBSA that allows a distressed employer to negotiate a new funding arrangement with plan members and retirees does require the Minister’s approval.

Pooled Registered Pension Plans (PRPPs) were established under the Pooled Registered Pensions Plans Act and associated regulations to provide employers and self-employed persons under federal jurisdiction with the opportunity to pool contributions together for investment purposes. In respect of supervision, OSFI’s responsibilities for PRPPs are similar to its responsibilities regarding defined contribution pension plans registered under the PBSA. One difference, however, is that PRPP administrators must obtain a license from OSFI before they can register and offer a PRPP. Conditions that must be satisfied in order for a corporation to obtain a license are set out in the PRPP Regulations.

To date, most applicants for these licenses have been insurance companies. OSFI is also responsible for licensing, registering and supervising PRPPs whose operations fall within the jurisdiction of both the federal government and that of a province participating in the Multilateral Agreement Respecting Pooled Registered Pension Plans and Voluntary Retirement Savings Plans (i.e. British Columbia, Manitoba, Nova Scotia, Ontario, Quebec and Saskatchewan), although exceptions are applicable with respect to Quebec’s Voluntary Retirement Savings Plans.

Risk Assessment Framework

Similar to the Supervisory Framework for FRFIs, OSFI has developed a Risk Assessment Framework for Federally Regulated Private Pension Plans. OSFI also has an early intervention and approval framework for private pension plans. The Pension Benefits Standards Act, 1985 (PBSA) provides the Superintendent with a wide range of discretionary intervention powers to address situations that give OSFI cause for concern.

Guide to Intervention

OSFI’s Guide to Intervention for Federally Regulated Private Pension Plans outlines the types of interventions, which may include the termination of a pension plan, replacing a plan administrator, or requiring additional disclosure to plan members. As is the case for financial institutions, there is no statutory role for the Minister in OSFI’s interventions with respect to private pension plans.

Policy Coordination

Domestic Coordination

Financial Institutions Supervisory Committee (FISC)

The Financial Institutions Supervisory Committee (FISC) is a statutory committee (set out in the OSFI Act) chaired by the Superintendent that meets on a quarterly basis, or more often if necessary, to facilitate the exchange of information on matters relating to the supervision of FRFIs. FISC (whose membership also includes the Governor of the Bank of Canada, the Deputy Minister of Finance, the President & CEO of CDIC, and the Commissioner of FCAC) is also the primary committee for coordination and communication among federal agencies with respect to strategies and action plans for addressing problem FRFIs, and other emerging issues which may have an impact on the health of FRFIs. FISC is not a decision-making body. FISC is supported by a Secretariat to manage the operational elements associated with FISC. There are also quarterly meetings of a sub-FISC group that meet to prepare for FISC meetings, and discuss key FRFI and financial sector risks in more detail.

The FISC meeting cycle follows a general planning process whereby the Secretariat prepares a draft FISC agenda for discussion at sub-FISC which is then finalized with the Superintendent, Assistant Superintendents, and relevant Senior Directors at a FISC planning session. Upon finalization of the agenda, meeting materials are prepared and distributed by the Secretariat through the OSFI FISC portal. Following FISC meetings, the Secretariat prepares official minutes of the meeting, which are forwarded to the OSFI Executive and the principals of the FISC agencies for comment. The minutes are formally approved at the next FISC meeting. The Secretariat also takes note of action items and ensures follow-up.

Senior Advisory Committee (SAC)

The Senior Advisory Committee (SAC) meets on a quarterly basis to facilitate discussion on key financial sector policy issues, including financial stability and systemic vulnerabilities, in order to inform the advice provided by the Department of Finance to the Minister of Finance. Its members are the same as FISC and the Deputy Minister of Finance is the Chair. SAC ensures coordination among the agencies and assesses how policies may affect FRFIs and the financial system more broadly. SAC is an informal (non-legislated) body but has been in place for many years and is well-established in its role.

Prior to every SAC meeting, there is a “sub-SAC” among the sub-principals and other senior officials of each agency to discuss the issues in greater detail and to assess the recommendations being prepared for SAC. The Assistant Superintendent, Regulation Sector, is OSFI’s sub-SAC representative. Sub-SAC also has a number of working groups that evaluate and conduct comprehensive inter-agency work on specific issues (e.g., resolution, housing finance), and which feed information and recommendations upwards to sub-SAC and, ultimately, to SAC. The Canada Mortgage and Housing Corporation (CMHC) is periodically invited to attend the sub-SAC and SAC meetings to discuss housing matters, when necessary.

The Department of Finance provides materials in electronic form to the agencies approximately one week in advance of the meeting. These materials are usually prepared by Department of Finance staff. However, depending on the subject matter, other agencies also contribute various documents (papers, presentations, etc.) for discussion, whether directly or through working groups. Ordinarily, all of these materials have been shared in draft form with working-level staff and subject matter experts within all of the agencies for their reactions, comments and suggested revisions in advance of the sub-SAC and SAC meetings. As such, Finance generally operates under the policy of “no surprises.” Internal briefings for the Superintendent occur before SAC meetings.

Board of Directors (CDIC)

The CDIC Board of Directors meets on a quarterly basis to deliberate and provide strategic direction on the affairs of the Corporation, including the approval of its corporate plan, by-laws, and other resolutions. Beyond CDIC’s corporate affairs, the Board also discusses resolution strategies for “troubled” deposit-taking institutions (i.e., those on CDIC’s Watchlist) and key financial sector policy issues. The Board also participates in tabletop exercises covering a number of different preparedness activities. The Superintendent and the Assistant Superintendent, Deposit-Taking Supervision are ex officio Directors, as are the deputy heads of the other federal financial sector agencies.

CDIC provides materials in electronic form to Board members and a very limited number of their staff via a controlled access website approximately 1-2 weeks in advance of Board meetings. Relevant Board materials are distributed to subject matter experts across OSFI for comment. Once all comments are incorporated, a briefing note is prepared for the Superintendent and Assistant Superintendent, Deposit-Taking Supervision.

CDIC and OSFI staff work closely to provide each other up-to-date information and analysis on the status of institutions of concern. While CDIC bases its own material on OSFI data, OSFI Supervision's insights help to clarify trends, the reliability of certain data, material developments at DTIs, and help provide context of the risks presented by various DTIs. Similarly, the Approvals staff provides timely and accurate information to CDIC staff on the status of applications or changes to DTIs.

A Strategic Alliance Agreement (SAA) is established between the two organizations to promote cooperation, particularly related to information sharing. This agreement was renewed in 2020.

With respect to any potential conflicts, which may occur from time to time (e.g., where the duties or decisions of the Superintendent may deviate from a direction proposed by CDIC), the Superintendent’s duties as a Director of the CDIC Board have been interpreted legally as being incidental and subordinate to the primary office of Superintendent. Therefore, in the unlikely event that a conflict arises, the Superintendent should refrain from voting on the relevant issue and, in his or her capacity as a Director of CDIC, the Superintendent should cease involvement with the issue. However, as an ex-officio member of the CDIC Board, the Superintendent must maintain a seat as a Board member.

Heads of Regulatory Agencies (HoA)

The Heads of Regulatory Agencies (HoA)meetings occur on a quarterly basis and serve as a forum for federal financial sector authorities and provincial securities regulators to exchange information and views, and to coordinate action on issues related to Canadian capital markets (e.g., sustainable finance, market functioning, derivatives and other instruments, shadow banking, open banking and other “perimeter of regulation” issues). HoA meetings are chaired by the Governor of the Bank of Canada and its membership includes the Superintendent, the Deputy Minister of Finance (or designate) and the heads of the Alberta, B.C., Ontario and Quebec securities regulators. The Bank of Canada provides secretariat services to the HoA. Prior to every HoA meeting, there is a “sub-HoA” conference call among senior officials of each HoA member (i.e., Assistant Superintendent-level) to finalize the meeting agenda. Currently, there are two sub-HOA working groups, the OTC Derivatives Working Group (currently chaired by the OSC), and the Crypto-Asset Working Group (currently chaired by the Bank).

The Bank of Canada consolidates discussion materials provided by individual HoA members and distributes them in electronic form to all members a few days in advance of the meeting. The HoA materials are distributed to staff across OSFI, as appropriate, for preparation of a written briefing for the Superintendent. There is a preparatory meeting held a few days prior to each HoA meeting, so that the Superintendent can ask questions on the briefing material and agenda items.

OSFI typically provide updates in areas that are important for the federally regulated financial sector that may be of interest to the HoA membership (e.g., capital and liquidity trends, climate risk / sustainable finance, etc.). However, OSFI generally does not contribute to market conduct related agenda items, beyond any items of interest related to its work on culture and conduct.

Canadian Council of Insurance Regulators (CCIR)

The Canadian Council of Insurance Regulators (CCIR) is an inter-jurisdictional association of insurance regulators whose mandate is to facilitate and promote an efficient and effective insurance regulatory system in Canada to serve the public interest. The financial sector supervisory bodies of all provinces and territories are members of the CCIR, while OSFI represents the federal government as an associate member (non-voting). OSFI sends senior staff to CCIR’s quarterly meetings. OSFI has increased its engagement with CCIR as part of a relationship building exercise with provincial regulators and related entities. CCIR provides a useful forum in which to share information on a problem insurance company, should the situation warrant. The Superintendent does not participate in CCIR.

Credit Union Prudential Supervisors Association (CUPSA)

The Credit Union Prudential Supervisors Association (CUPSA) is an interprovincial association composed of credit union deposit insurers and prudential supervisors across Canada. CUPSA exists to promote effective regulation and supervision of Canadian credit unions and caisses populaires. OSFI sends senior staff to CUPSA’s quarterly meetings and presents on topics of interest to the provincial regulators. OSFI also has the opportunity to request information on various topics from the provinces. OSFI has increased its engagement with CUPSA, as it provides a venue to discuss and share information on risk trends. This allows OSFI to identify risks materializing in the credit union system and monitor for the emergence of those risks in the federal system. The Superintendent does not participate in CUPSA.

Financial Market Infrastructures (FMI) Resolution Committee (FMI-RC)

Facilitating federal-level consultation and information sharing on matters relating to the resolution of Canadian financial market infrastructures (FMIs), the FMI-RC is chaired by the Governor of the Bank of Canada, and includes the Office of the Superintendent of Financial Institutions, the Canada Deposit Insurance Corporation and the Department of Finance Canada. The Chair facilitates meetings to consult with the Members on matters related to developing and updating resolution plans for FMIs and on other resolution matters. Members provide recommendations on the feasibility and credibility of resolution plans for FMIs and participate in any joint initiatives required to ensure that the federal authorities can effectively coordinate in event of an FMI resolution.

Canadian Association of Pension Supervisory Authorities (CAPSA)

CAPSA is a national association of pension regulators whose mission is to facilitate an efficient and effective pension regulatory system in Canada. It develops practical solutions to further the coordination and harmonization of pension regulation across Canada. CAPSA provides a forum where pension regulators across Canada share information on regulatory issues in their jurisdiction, and where possible, collaborate in developing solutions to address them. Every three years, CAPSA develops a number of strategic priorities that provide a framework for its initiatives. CAPSA develops regulatory policies and guidelines to improve pension plan administration and support pension plan administrators in meeting their fiduciary duty, while enhancing the protection provided to pension plan members across Canada.

OSFI is a member of CAPSA and participates on various committees and working groups to advance CAPSA’s current initiatives. OSFI staff attend quarterly CAPSA meetings where updates on the work of the committees are presented, topics of interest are discussed, and information is shared among the provincial regulators. The Superintendent does not participate in CAPSA.

International Standard Setting

Financial Stability Board (FSB)

The Financial Stability Board (FSB), established in 2009 in response to the financial crisis, exists to coordinate, at the international level, the work of national financial authorities and international standard setting bodies (BCBS, IAIS, and IOSCO) and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies. The FSB currently has a focus on implementation of the G20 financial sector reforms. The FSB is currently chaired by the US Federal Reserve Vice-Chairman Randal K. Quarles.

Policy Advice & Coordination

The FSB Secretariat circulates materials in electronic form to FSB members in advance of meetings (typically 7 to 10 days prior to a meeting, but often less since the beginning of the pandemic). A team receives the FSB materials and consults internally for preparation of a written briefing for the Superintendent. The briefings are sent directly to the Superintendent when they are completed. There is a preparatory meeting held a few days prior to each FSB meeting so that the Superintendent can be briefed (background, potential interventions) and can ask questions. The process is similar for all FSB meetings in which the Superintendent participates.

FSB Committees and Canadian membership

Plenary

The FSB Plenary is the primary decision-making body for the FSB. Decisions by the Plenary are carried out by consensus. The Plenary has a number of responsibilities including approving the work programme and the budget of the FSB; adopting reports, principles, standards, recommendations and guidance developed by the FSB, and more generally, deciding on any other matter governing the business and affairs of the FSB. The FSB Plenary is the largest of the FSB groups, comprising nearly 75 representatives. The Superintendent has a seat at the Plenary. The Department of Finance and Bank of Canada are the other Canadian institutions at the Plenary.

Steering Committee

The Steering Committee provides operational guidance between Plenary meetings to support the Plenary and carry forward directions of the FSB. The Steering Committee monitors and guides progress of the FSB’s ongoing work, promotes coordination across Standing Committees, standards-setting bodies, and other working groups, and ensures effective information flow to all FSB Members. The Steering Committee contains approximately half the representatives of the Plenary. To date, the Superintendent has served as the only Canadian representative on the Steering Committee.

Standing Committee on Assessment of Vulnerabilities (SCAV)

The SCAV’s functions are to monitor and assess vulnerabilities affecting the global financial system and propose to the Plenary actions needed to address them; monitor and advise on market and systemic developments, and their implications for regulatory policy; and provide input for the Early Warning Exercise conducted in collaboration with the IMF. The Bank of Canada represents Canada on the SCAV.

Standing Committee on Supervisory and Regulatory Cooperation (SRC)

The SRC's functions are to:

• address key financial stability issues relating to the development of supervisory and regulatory policy and seek to ensure that the different policy initiatives fit together into a coherent whole;

• assist in managing issues that require coordination among supervisors and regulators (e.g., issues that have cross-sector implications);

• identify potential areas that may require policy development to close regulatory gaps;

• set guidelines for, and oversee the establishment of, supervisory colleges; and

• advise on and monitor best practices in meeting regulatory standards with a view to ensure consistency, cooperation and a level playing field across jurisdictions.

The Superintendent represents Canada on the SRC. Since July of 2020, the Superintendent has delegated this role to the Assistant Superintendent, Deposit-Taking Supervision.

Standing Committee on Standards Implementation (SCSI)

The SCSI’s functions are to: ensure comprehensive and rigorous implementation monitoring of international financial standards, agreed G20 and FSB commitments, and other recommendations, through mechanisms such as the Coordination Framework for Implementation Monitoring. SCSI also undertakes peer reviews amongst its members and reports to the Plenary on members’ commitments and progress in implementing agreed upon policies and commitments. The Department of Finance represents Canada on the SCSI.

Working Groups of the FSB

There are a number of working groups at the FSB, typically reporting to a Standing Committee, which have been formed to tackle particular issues. Canadian FSB members, including OSFI, sometimes participate into these groups, typically at the working level. The Assistant Superintendent, Deposit-Taking Institutions, currently co-Chairs the working group on Climate Risks. Jeremy Rudin chaired the FSB’s roundtable on External Audit for the past few years.

Relationship between SCAV, SRC, and SCSI

Text Description - Relationship between SCAV, SRC, and SCSI

This graphic shows the relationship of three FSB committees and how the mandate of each committee helps inform the work completed in other committees. It shows three circles (representing three FSB committees) one flowing from one to the next. The first circle is represented as the FSB SCAV, which is responsible for the assessment of vulnerabilities. Its work helps inform the work of FSB SRC (the second circle), which is responsible for policy development and coordination. This circle then flows to the next circle, which is represented as the FSB SCSI. FSB SRC’s work helps inform this committee’s work, which is responsible for implementation monitoring and effects of reforms.

The role of the Strategic Policy Liaison team

• Preparing the briefing materials ahead of FSB meetings

• Coordinating input from various SMEs and structuring of the preparatory meeting

• Outreach to external partners (BoC, DoF, CSA, etc.)

Meeting Cadence

Pre-Pandemic

Cycle

• The FSB Cycle typically follows the G20cycle (i.e., beginning and ending with G20 Summits)

• Work often concludes with delivery of final reports/recommendations to the G20 Leaders (often in November)

Frequency of Meetings

• FSB Plenary meetings: 2 to 3 per year

• FSB Steering Committee meetings: 2 to 3 per year

• FSB SRC meetings: 3 to 4 per year

• FSB WG meetings (involving Superintendent): 2 to 4 per year

Format

• Mostly in-person meetings but also use of conference calls

Under COVID-19

• More frequent (but shorter) FSB meetings

• Beginning in March 2020, all meetings went virtual (by conference call). FSB will revisit practice in 2021, with potential for “in person” meetings.

• Much more condensed schedule (material delivered by FSB Secretariat often “just in time”).

Group of Central Bank Governors & Heads of Supervision (GHOS)

The Group of Central Bank Governors and Heads of Supervision (GHOS) is the oversight body of the BCBS. The BCBS reports to the GHOS and seeks its endorsement for major decisions. GHOS meets as needed but at least annually to review the BCBS’s work programme and strategic priorities. The Superintendent and Governor of the Bank of Canada sit on GHOS for Canada.

In addition to endorsing major decisions, the BCBS looks to the GHOS to:

• Approve the BCBS’s Charter and any related amendments

• Provide general direction for the BCBS’s work programme and strategic priorities; and

• Appoint the BCBS Chairman from among its members.

There is currently no formal briefing process (i.e., standing meeting) in preparation for meetings of GHOS. Briefings are prepared on an ad hoc basis, based on materials received in advance of meetings. The ad hoc briefing process is led by the Capital Division.

Basel Committee on Banking Supervision (BSBS)

The Basel Committee on Banking Supervision (BCBS) is the primary global standard-setter for the prudential regulation of banks and provides a forum for cooperation on banking supervisory matters. Its mandate is to strengthen the regulation, supervision and practices of banks worldwide with the purpose of enhancing financial stability.

The BCBS seeks to achieve its mandate through the following activities:

• exchanging information on developments in the banking sector and financial markets, to help identify current or emerging risks for the global financial system;

• sharing supervisory issues, approaches and techniques to promote common understanding and to improve cross-border cooperation;

• establishing and promoting global standards for the regulation and supervision of banks as well as guidelines and sound practices;

• addressing regulatory and supervisory gaps that pose risks to financial stability;

• monitoring the implementation of BCBS standards in member countries and beyond with the purpose of ensuring their timely, consistent and effective implementation and contributing to a "level playing field" among internationally active banks;

• consulting with central banks and bank supervisory authorities which are not members of the BCBS to benefit from their input into the BCBS policy formulation process and to promote the implementation of BCBS standards, guidelines and sound practices beyond BCBS member countries; and

• coordinating and cooperating with other financial sector standard setters and international bodies, particularly those involved in promoting financial stability.

The BCBS does not possess any formal supranational authority. Its decisions do not have legal force. Rather, the BCBS relies on its members’ commitments to achieve its mandate.

BCBS members include organizations with direct banking supervisory authority and central banks. After consulting the Committee, the BCBS Chairman may invite other organizations to become observers. Both OSFI (Assistant Superintendent, Regulation Sector) and the Bank of Canada sit on the BCBS for Canada.

There is a well-established process for BCBS briefings, which the Superintendent can attend to keep apprised of developments.

Text Description - Basel Committee of Banking Supervision

Committee of Banking Supervision

• Level 1
  • Basel Committee
    Ben Gully
    • Level 2
      • Risks & Vulnerabilities Assessment Group
        Mate Glavota
      • Policy and Standards Group
        Amar Munipalle
      • Supervisory Cooperation Group
        Kathryn Dickson; co-chair Ben Gully
      • Basel Consultative Group
        Steve Bevington
    • Level 3
      • Task Forces (TF)
        • TF on Climate-related Financial Risks
          Michael Chase
        • TF on Evaluations (BoC rep and co-Chair)
        • RCAP Review TF
          Ben Gully
        • Data Collection TF (no Canadian rep)
      • Expert Groups
        • Credit Risk and Large Exposures
          Patrick Tobin; co-Chair Brian Rumas
        • Securitisation
          Matthew Gordon
        • Research (BoC rep)
        • Market risk
          Leo Bozza
        • Disclosure
          Javinder Sidhu
        • Accounting and audit
          Renee Chen
        • Capital and leverage ratio
          Liane Orsi
        • Financial Technology
          Joshua Tang
        • Stress Testing
          Tamara VanDeWalle
        • Liquidity
          Robert Belanger
        • Pillar 2
          Regis Dahany
        • Anti-money laundering
          Erin Feeney
        • Margin requirements (OSFI monitoring; no formal rep)
        • Operational resilience
          John Preiato
        • Quantitative impact studies
          Sungchul Shin

International Association of Insurance Supervisors (IAIS)

The International Association of Insurance Supervisors (IAIS) is a voluntary membership organization of insurance supervisors and regulators from more than 200 jurisdictions in nearly than 140 countries. Canada (OSFI) was instrumental in its creation and early development.

The mission of the IAIS is to promote effective and globally consistent supervision of the insurance industry in order to develop and maintain fair, safe and stable insurance markets for the benefit and protection of policyholders and to contribute to global financial stability.

The IAIS is the international standard setting body responsible for developing and assisting in the implementation of principles, standards and other supporting material for the supervision of the insurance sector. The IAIS also provides a forum for Members and Observers to share their experiences and understanding of insurance supervision and insurance markets. In recognition of its collective expertise, the IAIS is routinely called upon by the FSB and other international standard setting bodies.

OSFI participates in several committees and sub-committees. As of May 2021, seven OSFI staff participate on IAIS committees / groups. Among the Parent committees on which OSFI participates is the IAIS Executive Committee, the Policy Development Committee, Implementation Assessment Committee (as of February 2021), and Macroprudential Committee. OSFI staff also participate on some working groups that report to these parent committees.

OSFI participates in several IAIS committees and sub-committees.

Senior Supervisors Group (SSG)

The Senior Supervisors Group (SSG) is a forum for senior representatives of supervisory authorities to engage in dialogue on risk management practices, governance, and other issues concerning complex, globally-active financial institutions. The group is comprised of senior executives from the bank supervisory authorities of those institutions’ home jurisdictions. The SSG leverages the network of relationships in the group to share information on supervisory approaches and also engages with the financial services industry to better understand new challenges and emerging risks that systemically important institutions face. The SSG is a useful forum for aligning supervisory thinking and priorities among jurisdictions, and was useful during the 2008 financial crisis. SSG meetings typically occur three times a year and are attended by the Assistant Superintendent, Deposit-Taking Supervision or his/her/their designate.

Approach to OSFI representation on international groups - governance and coordination

A review of OSFI’s representation on international groups was conducted in January 2021. A key goal of the review is to ensure that our level of involvement and areas of participation align with OSFI’s goals and priorities, as outlined in OSFI’s strategic plan. It also ensures that we are actively involved in those areas where we want to influence the outcome.

A key takeaway was to establish a framework for governance and coordination on international participation across OSFI. A group, comprised of Parent Committee members of FBS, BCBS, and IAIS committees, will be established to take this forward. The terms of reference for this group are being established. The new group will be chaired by the Senior Director, Capital Division.

OSFI Guidance Overview

What is OSFI Guidance?

Guidance forms a key component of OSFI’s regulatory framework. It establishes OSFI’s expectations in terms of prudential limits, disclosures, capital and liquidity adequacy, legislative and reporting requirements, and sound risk management practices. OSFI assesses compliance with expectations through its supervisory work and, if necessary, can enforce them through statutory means (e.g., Direction of Compliance, capital order).

OSFI guidance may take a number of forms, depending on the circumstances and objectives.

Guidelines for FRFIs set OSFI’s main expectations, and are typically principles-based and proportionate to FRFIs of different size, complexity and risk profile. In the case of PPPs, OSFI’s guidelines typically provide clarity on rules and requirements set out in legislation and regulation.

Advisories and Rulings (for FRFIs) or Newsletters (for PPPs) to clarify existing legislation or expectations in guidelines, formalize supervisory processes, or bridge a transition to more enduring guidance, such as a guideline.

From time-to-time, as required, OSFI also issues Letters that highlight timely issues or concerns and articulate OSFI expectations.

Text Description - OSFI Guidance Overview

This graphic contains three shapes arranged vertically to form the image of a simple house. A rectangle at the bottom represents the ground an contains the text “Legislation and Regulation”. There is a more square shape sitting on top of the rectangle that contains the words “OSFI guidelines”. A triangle sits on top of the other shapes and contains the words “Advisories Letters Newsletters Rulings”.

Framework for Setting Guidance Priorities

In a business-as-usual environment, OSFI is guided by its Strategic Plan and considers the following questions in order to determine guidance priorities:

• Regulatory Sufficiency

  Does current guidance establish clear expectations for FRFIs and PPPs that are sufficient and credible? Is there a lack of guidance altogether?

• Supervisability

  Can OSFI assess FRFIs’ adherence to the expectations set out in guidance?

• Proactivity

  Are there changes or anticipated changes in the operating environment (including market developments, new public policy, legislation or international standards) to which OSFI needs proactively to respond?

Text Description - Framework for Setting Guidance Priorities

This graphic shows a continuous circle with three connect spheres. Sphere 1 contains the text “Regulatory sufficiency” with a line extending to a question “Do we have a rule or do we need a rule”. Sphere 2 contains the text “Supervisability” with a line extending to a question “Can we assess institutions based on the guidance we have?”. Sphere three contains the text “Proactivity” with a line extending to a question “Are there changes or challenges in the environment that require adapting guidance”. In the center of the circle, surrounded by the spheres are the words “Guidance prioritization".

Current Policy Priorities

The three key current policy priorities in the short-term are listed in the menu in blue. All other lessor policy priorities files are listed for information only (in grey). A schedule of OSFI's near-term plan of prudential policies for FRFIs and Pension Plans is outlined in our May 6 Letter to the Industry.

Climate-related Risks

Discussion Paper

In January 2021, OSFI launched its consultation with its discussion paper on climate-related risks. The purpose of this consultation was to initiate a discussion with external stakeholders on federally regulated financial institutions (FRFIs) and federally regulated pension plans (FRPPs) climate-related risk management in the context of a changing climate and a changing economy. By April 2021, OSFI received over 70 submissions from a variety of stakeholders ranging from FRFIs, FRPPs and their industry associations, to special interest organizations and concerned individuals. The Prudential Policy team is analyzing the feedback and making recommendations for next steps.

Project Governance

The climate risk regulatory response project is part of the larger OSFI-wide climate program, which is overseen by the Climate Risk Steering Committee and reports to the Business Risk Committee (BRC). The Prudential Policy team will be presenting the summary of consultation feedback and recommendations for next steps to the BRC in July 2021.

Non-Financial Risk (NFR) Regulatory Guidance Portfolio

In early 2021, internal discussions (REG/RSS) aimed at articulating the regulatory “architecture” of financial and non-financial risks led to planning and prioritization of certain areas of NFR regulatory guidance. From these discussions, a comprehensive portfolio of NFR regulatory guidance projects was finalized, spanning 2021-22 to 2022-23, in pursuit of Strategic Plan Goal #2. Projects also respond to priorities set forward in OSFI’s fall 2020 public consultation on technology and related risks. In brief, the portfolio addresses the following NFR areas:

• Operational Risk and Resilience

• Technology and Cyber Risk

• Third Party Risk (and Outsourcing)

• Advanced Analytics and Model Risk

• Culture and Reputation Risk

• Compliance Risk

A presentation dated April 2021 (available from Angie Radiskovic, Senior Director, Non-Financial Risk Group), to the Assistant Superintendent, Regulation Sector and Assistant Superintendent, Risk Support Sector provides more information on project timelines and milestones. A cross-sector NFR Steering Committee--with senior-level representation from REG, RSS, DTSS, ISS, and CSS--provides direction and oversight for this work.

Housing Finance & Guideline B-20

Housing finance is an issue that has received considerable public attention in recent years, and is an issue that OSFI is closely monitoring. OSFI regulates and supervises a number of federally regulated financial institutions such as banks and trust companies that are mortgage lenders (FRFI lenders), as well as mortgage insurers.

Guideline B-20 and the Minimum Qualifying Rate

• In 2012, OSFI issued Guideline B-20 (Residential Mortgage Underwriting Practices and Procedures), covering prudent residential mortgage loan origination and acquisition activities (e.g., expectations around income verification of the borrower, debt servicing, documentation requirements, etc.). In 2017, OSFI amended Guideline B-20 to strengthen the elements related to income verification, non-conforming loans and the minimum qualifying test (or, as referred to by the media, the “stress test”).

• The minimum qualifying rate, in particular, has received a significant amount of public scrutiny. Currently, Guideline B-20 establishes that the qualifying rate for uninsured mortgages (i.e., those with a down payment of greater than 20 percent) should be the greater of the mortgage contractual rate plus 2% or the Bank of Canada five-year benchmark rate. This benchmark rate serves as a minimum qualifying rate (or “floor”) in a low interest rate environment.

• In early 2020, OSFI initiated a consultation process on the benchmark for the minimum qualifying rate for uninsured mortgages. OSFI subsequently suspended its consultation in March 2020 due to the COVID-19 pandemic. Since the pandemic began, however, interest rates have declined to record low levels, which have contributed to the conditions for elevated house prices across Canada. In addition, while Canadians have gained significant savings throughout the pandemic, high levels of household indebtedness remain.

• Given these considerations, in April 2021, OSFI relaunched its policy work on the minimum qualifying rate. It proposed to establish a fixed floor rather than relying on the current or previously proposed benchmark rate. The Superintendent would initially set the floor at 5.25 percent. This would ensure that the financial system was adequately prepared for the possibility of a return to pre-pandemic economic conditions. The average benchmark rate that prevailed in the 12 months leading up to the pandemic was 5.25 percent.

• Following a brief consultation process, OSFI announced on May 20, 2021 that it would move forward with its proposal. Effective June 1, 2021, the qualifying rate for all uninsured mortgages is the greater of the borrower’s mortgage contractual rate plus 2% or 5.25 percent.

• OSFI will review and communicate the minimum qualifying rate at a minimum annually, every December, well in advance of the high-volume housing spring season. OSFI will make a decision based on its own supervisory and analytical work. As well, OSFI will consult its federal financial regulatory partners, notably the Department of Finance Canada and the Bank of Canada.

Assurance on Capital, Leverage and Liquidity Returns Project

Overview

OSFI issued a discussion paper on April 13, 2021 to request feedback from FRFIs regarding proposals to enhance assurance expectations on capital, leverage, and liquidity returns.

Project Objective

• To proactively enhance and align assurance expectations over key regulatory returns for federally regulated insurers (FRIs) and federally regulated deposit-taking institutions (DTIs) given the increasing complexity arising from the evolving regulatory framework due to IFRS 17 and Basel III reforms.

• To support OSFI’s Strategic Goal 1 by continuously looking at ways to improve the consistency, accuracy and timeliness of risk assessments.

Summary of Proposals

OSFI is proposing to broaden assurance expectations in the following 3 areas:

• External audit opinion, which includes an external audit on key regulatory ratios including related controls and processes;

• Senior management attestation, which includes an attestation by senior management on key regulatory returns following an internal review of the returns; and

• Internal audit opinion, which includes an internal audit on key regulatory returns including related controls and processes.

Scope

Scope for FRIs is proposed to be effective fiscal 2022 as the proposals enhance existing assurance expectations:

• Annual external audit opinion on capital ratios.

• Monthly/quarterly/annual senior management attestation, and annual internal audit opinion on capital returns.

• The insurance capital schedule references will be updated in the subsequent draft guideline for this initiative after draft returns for IFRS 17are published by OSFI.

Scope for DTIs, including SMSBs, is proposed to be effective fiscal 2023 as the proposals introduce/formalize new assurance expectations:

• Annual external audit opinion on capital, leverage and liquidity ratios.

• Monthly/quarterly/annual senior management attestation, and annual internal audit opinion on capital, leverage and liquidity returns.

• Proposed assurance expectations complement OSFI’s initiative to advance proportionality in the capital and liquidity regime for SMSBs.

• The capital and liquidity schedule references are aligned with OSFI’s March 2021 consultations on Basel III implementation.

Next Steps

• Comments on the discussion paper are due June 18, 2021.

• OSFI is targeting the publication of a draft guideline for public consultation by Fall 2021, and a final guideline by Spring 2022.

IFRS 17 Insurance Contracts Standard

Overview

International Financial Reporting Standard (IFRS) 17, Insurance Contracts, replaces the existing accounting standard (IFRS 4) on Jan 1, 2023. IFRS 17 provides guidance with respect to measurement of an insurance contract liability, profit attribution, and disclosure requirements where the previous IASB standard was silent. IFRS 17 provides consistent principles for all aspects of accounting for insurance contracts, and allows for a more meaningful comparison of insurance companies.

This is a significant accounting, data, systems and process change for the insurance industry. OSFI recognized the effort involved in 2017 when the near final IFRS 17 standard was issued. OSFI is working with the industry and other Canadian regulators to revise its existing guidance to support a robust implementation by institutions

Project Objective

To support the robust implementation of IFRS 17 by maintaining an effective regulatory policy framework through the IFRS 17 transition and ensuring OSFI has the tools and training necessary to supervise and regulate Federally Regulated Insurers (FRIs) efficiently after the transition in order to meet OSFI’s mandate of safety and soundness. A cornerstone principle for the project, communicated to industry in this letter is that OSFI intends on maintaining the insurance capital frameworks consistent with current capital policies and to minimize potential industry-wide capital impacts on transition.

Industry Concerns and OSFI’s View and Response

Capital Framework Neutrality on Transition to IFRS 17

OSFI intends on maintaining the insurance capital frameworks consistent with current capital policies and to minimize potential industry-wide capital impacts on transition.

Unwarranted Capital Volatility due to IFRS 17

OSFI has made changes to the 2023 LICAT to address many of these concerns. Any further concerns will be discussed with industry.

Systems Preparedness

OSFI encourages FRI’s to select accounting policy choices early, and design workable solutions with calculation engine service providers such as Moody’s GGY.

Discount Rate Comparability and Consistency

OSFI Actuarial Division working with CIA to narrow the range of acceptable practice.

Basel III Implementation

In December 2017, the Basel Committee finalized revisions to the Basel III Framework. These revisions complemented the initial phase of Basel III reforms that were finalized by the Committee immediately following the 2007-2009 global financial crisis. A key objective in these more recent revisions was to reduce excessive variability of risk-weighted assets (RWA). The revisions to the regulatory framework thus aim to help restore credibility in the calculation of RWAs by: (i) enhancing the robustness and risk sensitivity of the standardized approaches for credit risk and operational risk, which will facilitate the comparability of banks’ capital ratios; (ii) constraining the use of internally-modelled approaches; and (iii) complementing the risk-weighted capital ratio with a revised leverage ratio and a revised and robust capital floor.

Subsequently, in January 2019, the BCBS finalized significant revisions to its market risk framework that: i) clearly define the boundary between the trading book and the banking book; ii) enhance the internal models approach which relies upon the use of expected shortfall models and sets out separate capital requirements for risk factors that are deemed non-modellable; and iii) revise the standardized approach to be more risk-sensitive, and be designed and calibrated to serve as a credible fallback to the internal models approach. Further, in July 2020, the BCBS finalized revisions to the credit valuation adjustment (CVA) risk framework.

Domestically, OSFI’s implementation of the Basel III reforms is guided by the following key principles:

• The final Basel III reforms will be used as a starting point, although modifications may be made to take into account the unique characteristics of the Canadian market;

• Changes to the domestic capital framework should help improve the risk sensitivity of the capital rules and provide the right incentive structures to DTIs;

• The revisions to the domestic capital framework should aim to promote the safety and soundness of DTIs while taking into consideration level playing field and competitiveness issues.

This policy work culminated in the March 2021 release of draft revisions to OSFI’s Capital Adequacy Requirements (CAR) Guideline and Leverage Requirements (LR) Guideline for public consultation until early June that affect the Basel III reform package. The NCCF enhancements noted above were also included as revisions to the Liquidity Adequacy Requirements (LAR) Guideline for public consultation at the same time. In June 2021, OSFI issued proposed revisions to the CAR Guideline related to CVA risk. Final guideline revisions for all areas are expected to be published by end-2021, for implementation in Q1-2023 (with the exception of market risk and CVA risk which will be implemented in Q1-2024).

Capital treatment of private mortgage insurance for DTIs

Under the Protection of Residential Mortgage or Hypothecary Insurance Act (PRMHIA), the Government of Canada guarantees mortgages insured by private mortgage insurers (PMI) subject to a deductible equal to 10% of the original principal amount of the mortgage loan. The proposed changes would more accurately capture the way the guarantee is written. Although this is a change in bank capital rules, it is of particular interest to the mortgage insurers.

To coincide with broader changes to the CAR Guideline as part of the domestic implementation of the Basel III reforms expected to come into effect Q1 2023, OSFI has proposed revisions to the capital treatment of privately insured mortgages to more closely align with the government backstop provided under PRMHIA. Public consultation on these proposed revisions ended in early June 2021.

Proportionality for Small and Medium-Sized Banks (SMSBs)

As noted in its strategic plan, OSFI is pursuing means to further adapt its regulatory and supervisory approaches to the size, complexity and risk profile of financial institutions. OSFI’s review of the capital and liquidity frameworks aims to strike an appropriate balance in relation to the following principles:

• The capital and liquidity frameworks applied to SMSBs should reflect the nature, size, complexity and business activities of these institutions.

• Capital and liquidity requirements should contribute to the protection of depositors and creditors and allow institutions to compete effectively and take reasonable risks.

• The revisions to the frameworks should strike the right balance between improving the risk sensitivity of the requirements for SMSBs and reducing the complexity of the frameworks to make them more fit for purpose.

OSFI published a new SMSB Capital & Liquidity Guideline in Mach 2021, concurrent with the consultation associated with the domestic implementation of the Basel III reforms. Some of the key features of the new framework for SMSBs include the segmentation of DTIs into three different categories for purposes of determining capital and liquidity requirements; as well as the introduction of a number of simplified approaches (subject to limitations) for credit risk, operational risk, and a Simplified Risk Based Capital Ratio for Category III SMSBs that replaces the current risk-based capital ratio and the leverage ratio.

Development of an SMSB IRB Capital Buffer

OSFI commenced work during the spring of 2021 on a project that is focused on the establishment on capital expectations for small and medium-sized banks that have been approved to use the Internal Ratings Based approach for credit risk capital requirements. There is currently only one SMSB which is approved to use IRB. However, other SMSBs are interested in becoming IRB banks. OSFI needs to ensure that its capital expectations for IRB SMSBs are prudent, consistently determined, credible, replicable and understood by stakeholders.

Pillar 3 Disclosures Project

Overview

The Pillar 3 disclosure projects were set up to provide a plan and structure on developing guidelines for Canadian deposit-taking institutions (DTIs) on adopting the Pillar 3 disclosure requirements as set out by the Basel Committee on Banking Supervision (BCBS).

Expected Result

To provide the public with relevant information on the regulatory capital and risk exposures of federally regulated DTIs. Public disclosures increase transparency, comparability and public confidence in DTIs and the Canadian financial system.

Expected Completion Date

• DSIBs - February 2023
• SMSBs - April 2023

General Approach

The approach below applies to both the DSIB and SMSB projects:

• Phase 1 – Policy development and internal consultations
• Phase 2 – Public Consultation with the Industry
• Phase 3 – Finalization of Guideline based on Public Consultations
• Phase 4 – Implementation & Training

Segregated Fund Guarantees – Life Capital

Objectives

• Existing approach for liability valuation and capital uses the 2001 CIA method, based on real world scenarios. The calibration is outdated and certain risks are not captured in current framework.

• IFRS 17 will require insurers to use a market consistent approach to value segregated fund guarantees.

• Development of a new standard approach is on-going with industry consultation and Quantitative Impact Studies (QIS).

[Information was severed in accordance with the Access to Information Act]

Key ongoing initiatives of the IAIS are the development of the Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame), which includes the creation of a global Insurance Capital Standard (ICS), and the holistic framework for systemic risk in the insurance sector.

Insurance Capital Standard

• The IAIS adopted a global Insurance Capital Standard Version 2.0 (ICS) for a five-year monitoring period. After which, jurisdictions may choose to adopt the ICS as a Prescribed Capital Requirement.

• [Information was severed in accordance with the Access to Information Act]

Common Framework (ComFrame)

• In November 2019, the Internationally Active Insurance Supervisors (IAIS) announced the adoption of the ComFrame. ComFrame establishes supervisory standards and guidance focusing on the effective group-wide supervision of Internationally Active Insurance Groups (IAIGs).

• ComFrame also sets out criteria for determining whether an insurer is an IAIG. there are currently three Canadian IAIGs under OSFI’s supervision:

  • Canada Life Assurance Company

  • Manufacturers Life Insurance Company

  • Sun Life Assurance Company of Canada

• [Information was severed in accordance with the Access to Information Act]

• Insurance Capital plans to initiate a high-level gap analysis against these requirements starting in Q4 2020-21.

Holistic Framework

• The IAIS has developed an activities-based approach (ABA) to evaluating and mitigating systemic risk in the insurance sector. The existing entity-based approach (EBA) looks at a single firm and whether its failure imposes a threat to the wider financial system. The new approach recognizes that systemic risk may arise from both the collective activities/exposures of insurers at a sector-wide level as well as from the distress or disorderly failure of individual insurers. The Holistic Framework was adopted in November 2021.

• From OSFI’s perspective, the new framework could have implications for a number of insurers as it depends on the build-up of systemic risk within the insurance sector, and specific activities within insurers. OSFI may need to enhance supervisory monitoring requirements of Canadian Insurers depending on policy measures developed for the Holistic Framework, for example, liquidity risk monitoring.

Liquidity Framework for Insurers

• As of May 2021, there is no formal liquidity framework in insurance (e.g. akin to what deposit-taking institutions are subject to). This has been an identified gap in recent IAIS TJAs. [Information was severed in accordance with the Access to Information Act]

Capital Framework for Commercial Mortgage Insurance

• A project is underway to revise the existing capital framework for commercial mortgage insurance due to its limited risk sensitivity and significant growth of this business in recent years. Insurance Capital is aiming to have the revised framework implemented for January 1, 2025.

• In January 2017, OSFI implemented a new residential mortgage capital framework, which is more sophisticated and risk sensitive relative to its predecessor, and it significantly increased the regulatory capital requirements in respect of residential mortgages. However, OSFI did not develop an updated regulatory capital framework for commercial mortgages at the same time. This was motivated by the desire to expedite the implementation of a new residential mortgage framework, while also considering that (i) Canada Mortgage and Housing Corporation or CMHC, a crown corporation, is the only insurer permitted to underwrite commercial mortgage insurance, and (ii) commercial mortgages represented a small portion of total insured mortgages.

• In the last several years, the total level of residential mortgage insurance in force has been declining, but CMHC’s commercial mortgage insurance business has grown, from $63 billion of commercial mortgage insurance at 2016-YE, which represented 12% of CMHC’s overall insured mortgage portfolio and 8% of total industry insurance in force, to $91 billion of commercial mortgages at 2020-Q2, representing 21% of CMHC’s total insured mortgages and 13% of the industry total.

Use of Internal Models by Insurance Companies

• Insurance companies typically determine regulatory capital using OSFI’s standardized capital frameworks, however, OSFI has granted approval to more sophisticated companies to use their own internal models for determining regulatory capital. These approvals have historically been limited to large life insurers’ models for segregated fund guarantee products.

• [Information was severed in accordance with the Access to Information Act]

Unencumbered assets and pledging

• This initiative aims to enhance our understanding of the full range of DTIs’ pledging/encumbrance policies and activities, allowing us to update guidance and monitoring practices as needed. These efforts will close gaps in OSFI’s guidance and monitoring practices pertaining to pledging activities and help ensure that DTIs retain sufficient unencumbered assets to support their capacity to recover in times of stress.

• OSFI’s development of a more comprehensive approach to asset encumbrance is guided by the following principles (with the focus on going concern):

  • Institutions can withstand a period of financial stress by having the ability to access additional secured funding during periods of stress.

  • Institutions should recognize risks created by BAU pledging activities, which are exacerbated under stress (e.g. diminishing quality of unencumbered assets, sudden increases in required collateral, migration of eligible collateral requiring replacement/substitution).

  • OSFI has the information needed to adequately monitor and supervise asset encumbrance, and the tools needed to better use its data assets to achieve this objective.

  • OSFI’s expectations related to asset encumbrance and pledging activities are clear and transparent.

• [Information was severed in accordance with the Access to Information Act]

Regulatory Flexibility to Support FRFIs and FRPPs during COVID-19

• OSFI introduced a number of regulatory and supervisory measures in response to COVID-19 with the objectives of providing flexibility to institutions to address stressed conditions resulting from the rapid onset of the pandemic. The measures were also intended to align with various government programs, and promote the financial resilience and stability of financial institutions.

• The adjustments that OSFI made to its expectations during the pandemic were done so in a manner that aligned with four key criteria that were communicated publicly. Specifically, changes had to be:

  • Credible – measures are transparent, preserve the integrity of the regulatory framework and are within international standards

  • Consistent – measures can be applied in the same way to all comparable institutions

  • Necessary – regulatory adjustments are not made unless other reasonable alternatives could not or should not be used

  • Fit-for-Purpose – changes made to adapt to the current extraordinary circumstances should make capital and liquidity measurements more accurate and avoid obscuring the situation, and should be phased out when no longer warranted

• Some of the COVID-19 measures that OSFI implemented included, but were not limited to, exclusions of certain assets from the Leverage Ratio (LR); a restriction on common share buybacks, and increases to dividends and executive compensation; special capital treatment for payment or premium deferrals; transitional add-backs for expected credit losses (ECLs); lowering the Basel II floor for IRB banks to 70%; a temporary increase in the covered bond limit; and a temporary freeze on portability transfers and annuity purchases relating to defined benefit provisions of pension plans. Most of these measures have since been unwound, while others have a set expiry (e.g. upon implementation of Basel III) or will be reconsidered in the near future (e.g. LR exclusions).

Capital Precedents

• Part of Capital Division’s work involves assessing the eligibility of newly-proposed instruments (e.g. preferred shares, subordinated debt, TLAC notes) in relation to the various eligibility requirements for capital that are outlined in OSFI’s capital guidance pertaining to each industry.

  • In mid-2020, OSFI issued a significant capital precedent for an instrument that was first issued by Royal Bank, and which has since provided numerous FRFIs greater access to Additional Tier 1 capital from institutional investors in Canada and abroad. FRFIs have keen interest in the LRCNs given the tax deductibility of coupons, as well as the depth of the institutional market for the securities in comparison to preferred shares. OSFI published a revised ruling for the LRCNs in March 2021 which was intended to provide flexibility for smaller and/or closely-held FRFIs, including SMSBs, as well as translate the issuance limits for life insurers.

  • [Information was severed in accordance with the Access to Information Act]

The Superintendent

Duties & Powers

Duties

The authority of the Superintendent is provided pursuant to the powers granted under the Office of the Superintendent of Financial Institutions Act (OSFI Act) as well as the following Acts that govern federally regulated financial institutions (FRFIs).

FRFI Statues

• Bank Act (BA)

• Insurance Companies Act (ICA)

• Trust and Loan Companies Act (TLCA)

Federally Regulated Private Pension Plan Statutes

• Pension Benefits Standards Act, 1985 (PBSA)

• Pooled Registered Pension Plans Act (PRPP Act)

Sections 4 and 6 of the OSFI Act provide for the Superintendent’s duty to administer the federally regulated financial institutions (FRFIs) statutes in respect of OSFI’s prudential mandate.

Under these statutes (and associated regulations), the Superintendent possesses a range of statutory powers and alternatives, including a range of powers to intervene in the business and affairs of a FRFI for prudential reasons. The Superintendent is also designated some limited authorities (e.g., transfer of assets to a foreign liquidator) under the Winding-up and Restructuring Act (WURA).

Generally, the exercise of any of these powers would be discussed in the context of various OSFI meetings, prior to their usage. Recourse to statutory powers is relatively rare, and is only undertaken when non-statutory means (e.g., moral suasion in the Supervision process, OSFI letters) do not work.

Section 10 of the OSFI Act provides that officers or employees of OSFI serving in an appropriate capacity may exercise the power or performance of a particular duty or function of the Superintendent. However, the powers vested in officers or employees may be subject to any terms and conditions specified by the Superintendent.

Powers

OSFI has developed a comprehensive Framework for Exercising the Superintendent’s Powers. The Framework outlines the delegation in place within OSFI for exercising particular powers and duties. More details can be provided by the Legal Services department.

Schedule & Meeting Cadence

Below is a summary of the meetings (both internal and external) which the Superintendent regularly attends. This list is not exhaustive, but provides a sense of regularly occurring meetings and selected others.

External: Organizational Commitments

Frequency

Toronto Leadership Centre Board

Meets bi-annually for 5 to 6 hours. The Superintendent is on the Board of Directors of the Toronto Centre and, therefore, attends its semi-annual Board meetings.

Canadian Public Accountability Board (CPAB) Council of Governors

Meets annually for 2 hours. As a permanent member of CPAB’s six member Council of Governors (CoG), the Superintendent meets with other CoG members annually. The Council provides high-level assessments of CPAB against its mandate and has the power to appoint or remove Board directors, the Board Chair and Vice-Chair.

External: Industry

Frequency

Industry Budget Meetings:

• Canadian Bankers' Association (CBA)
• Canadian Life and Health Ins. Association (CLHIA)
• Insurance Bureau of Canada (IBC)

Meets annually for 2 hours

Joint meetings with CEOs

• Large Bank CEOs
• Life Insurance CEOs

Meets bi-annually for 1.5 to 2 hours

FRFI Board Meetings

• SIB+ Mid-Size Banks
• Large Insurance Companies

Banks: meets semi-annually for 1.5 hours

Ins Cos.: meets annually for 1.5 hours

Joint meeting with:

• Canadian Institute of Actuaries (CIA)
• Actuarial Standards Board (ASB)

Meets annually for 2 hours

Internal

Frequency

Executive Roundtable (ERT)

Informal touchpoint with EC

Meets 2x weekly

One-on-one with direct reports

Meetings bi-weekly for 1 hour

Superintendent's Office touchpoint

Meets weekly for 1 hour

Executive Committee Meetings

• Regular EC
• Thematic EC
• Special EC

Regular EC: meets monthly for 1 hour

Thematic EC: varies, meets 1x-2x monthly for 1 hour

Special EC: varies, meets monthly for 1 hour

Internal Audit

Meets quarterly for the full day

EC "Retreats"

Strategic Planning sessions, blue-sky, etc.

In-person retreat: annually for multiple days

Virtually: varies for 2-3 hours

Business Risk Committee (BRC)

• BRC-Triage
• BRC-SUP
• BRC-MAC

meets for 2-3 hours:

• BRC-Triage: meets 5x a year
• BRC-SUP: meets 2x a year (for ISS and DTSS)
• BRC-MAC: meets 4x a year

First 90 Days: First 90 Days: Priorities & Decisions

Some of the following issues require you to take action in your first 90 days. For others you are not obliged to act, but there is a window of opportunity in the next 90 days of which you should be aware.

Internal Issues Requiring Early Consideration

1. Meeting your new colleagues and introducing yourself

   Communications and Corporate Affairs Division will provide you with options and suggestions. You may also wish to consult the members of the Executive Committee.

2. Resetting the return to office date

   In June 2020, the Superintendent announced that employees would not be required to return to working in OSFI offices before June 2021. [Information was severed in accordance with the Access to Information Act]

3. [Information was severed in accordance with the Access to Information Act]

4. [Information was severed in accordance with the Access to Information Act]

5. Staffing the Superintendent’s Office

   The Superintendent has chosen to keep his personal office very small; it consists of an Executive Assistant appointed on an indeterminate basis, and a Special Advisor drawn from the “business” who is appointed for a (roughly) two-year term. The term of the current Special Advisor ends in October. [Information was severed in accordance with the Access to Information Act]

6. Role of the Chief Actuary in the Executive Committee

   The Office of the Chief Actuary (OCA) is usually described as “an independent unit” within OSFI. This independence arises from the fact that the Chief Actuary has statutory and professional responsibilities that are separate from those of the Superintendent, that the OCA has its own source of funds distinct from the funding of the rest of the Office, and the Superintendent’s decision to reinforce that while the Chief Actuary reports to the Superintendent, it is the Chief Actuary who is solely responsible for the content and actuarial opinions in reports prepared by the OCA.

   [Information was severed in accordance with the Access to Information Act]

7. Delegation of authorities

   The Superintendent uses three separate delegation instruments to delegate statutory authorities, HR authorities, and finance authorities, respectively. All of these continue to be in force unaltered when a new Superintendent is appointed. You will want to review the delegation of your statutory authorities without undue delay to ensure that you are aware of the current framework; you may revise it at any time. The Public Service Commission should be in touch with you early in your term to arrange renewal of the HR delegation. The finance delegation must be reviewed annually by the CFO, or on the appointment of a new Minister (not a new Superintendent).

8. Supervisory Framework Review

   OSFI has recently launched a review of the Supervisory Framework. While this will be a major project that will take some time, the scope and objectives of the project will be confirmed in the next few months. [Information was severed in accordance with the Access to Information Act]

External Issues Requiring Early Consideration

9. Meetings with external stakeholders

   You should expect that many stakeholders will seek to meet with you early in your term. [Information was severed in accordance with the Access to Information Act]

10. Plan for Early Communications

    In the past, Superintendents often relied on speeches to set out broad policy priorities. [Information was severed in accordance with the Access to Information Act]

11. Time-sensitive policy issues

    [Information was severed in accordance with the Access to Information Act]

    In May, we published OSFI’s Near-Term Plan of Prudential Policy for Federally Regulated Financial Institutions and Federally Regulated Private Pension Plans. [Information was severed in accordance with the Access to Information Act]

    OSFI announced restrictions on financial institutions’ ability to increase dividends, buy back shares and increase total executive compensation in March 2020. These restrictions, with some limited exceptions announced in December 2020, are still in place. [Information was severed in accordance with the Access to Information Act]

OSFI & Minister’s Office

Relations with the Minister of Finance

Notification of Financial Institution or Industry Developments

Ministerial approvals under financial institutions statutes (described above) constitute an area of close contact between OSFI and the Minister’s Office. As a general matter, OSFI works closely with the Department of Finance on managing the approvals process, and the Department has its own protocol with the Minister’s Office in this regard. OSFI provides the Department with early notice of transactions which raise policy questions.

Over the course of the fiscal year, there are also several OSFI “corporate documents” requiring Ministerial approval (e.g., OSFI’s annual report, as well as various financial documents). These are managed in a similar fashion involving officials of the Department of Finance, and Treasury Board as necessary.

OSFI and the Minister’s Office also operate under a general policy of “no surprises.” This means that if OSFI becomes aware of a significant development involving an individual financial institution, the financial services industry, or an OSFI-generated conclusion or precedent that is likely to be sensitive and garner attention, OSFI informs the Minister’s Office and the Department of Finance as soon as possible.

Memoranda to the Minister

Every year, OSFI must provide the Minister with certain memoranda. Although this is generally pro forma, it does require that OSFI focus on key messages of intent to the Minister. The key memoranda to the Minister—apart from ongoing Ministerial Approvals (Regulation Sector) — include:

Memorandum/Document

Description

Annual Compliance Letter (Supervision Sector)

(“Report on Examinations and Inquiries into the Business and Affairs of Federally Regulated Financial Institutions”)

The FRFI statutes require that OSFI report annually to the Minister on examinations into the business and affairs of FRFIs for the last fiscal year ended. While not required by legislation, OSFI also includes in these letters an overview of federally regulated pension plans. The letter is provided for the Minister’s information and no actions are required. OSFI usually sends the letter in late May or early June.

Protection of Residential Mortgage or Hypothecary Insurance Act (PRMHIA)

Under PRMHIA, the Superintendent provides an annual memorandum to the Minister of Finance regarding OSFI’s examination of private mortgage insurers, their compliance with requirements under the Act and their capital adequacy.

Annual Report

Section 40 of the OSFI Act requires that the Office prepare an annual report on its operations. The Minister of Finance must table the report before Parliament no later than the fifth sitting day of the House of Commons and Senate after the September 30th following the end of the fiscal year for which the report is written (i.e., in early October).

Various reports for Government central agencies and Officers of Parliament.

On a regular basis, OSFI must produce various reports, as required by law, to certain Government agencies (e.g., Treasury Board, Public Service Commission) relating to financial and human resources management. Generally speaking, these reports are sent to the Minister for approval and/or review before publication.

Reporting on compliance with the Access to Information Act and the Privacy Act is conducted through the Annual Report process (above).

Governance within OSFI

The Executive Committee

Overview

In support of OSFI’s Strategic Plan goal 3 (agility and operational effectiveness), governance ensures transparency and accountability in OSFI’s decision-making and supports strategic alignment of corporate decisions. More specifically, it determines who has power, who makes decisions, how other players make their voices heard and how account is rendered.

Governance Structures

The Executive Committee meetings and Senior Governance Committees are the primary strategic decision-making bodies at OSFI. Business Risk Committee (BRC) and Common Supervisory Services Committee (CSSC) are a unique hybrid integration between the Executive Leadership (as Chairs of these committees) and Senior Management (as committee members).

• Executive Committee (EC)

  The EC is the senior governance entity at OSFI. It gets its authority from the Superintendent, within the Superintendent’s authority as delineated in the OSFI Act. Specifically, it sets OSFI's strategic direction and sets the tone and tenor for the organization.

• Senior Governance Committees

  Senior Governance Committees are a formal standing committees of OSFI senior management representatives with authority to make decisions and be accountable on strategic data and technology, people and culture, and key operational matters, in support of OSFI’s Strategic Plan and goals. They are accountable for strategic matters related to the risks that face the institutions and pension plans that OSFI oversees.

• Audit Committee

  Provides objective advice and recommendations regarding the sufficiency, quality, and results of assurance on the adequacy and functioning of OSFI’s risk management, control and governance frameworks and processes, including accountability and auditing systems

Text Description - Governance Structures

This graphic delineates EC and Senior Management participation at various governing bodies.

The EC has chair roles at EC meetings (Regular, Special, and Thematic), BRC, and CSSC.

Senior Management has chair roles at Data & Technology Committee, Operating Committee, People & Culture Committee.

The overlap between EC and Senior Management occurs at BRC and CSSC, where Senior Management attend committees chaired by the EC.

Text Description - Risk Categories

This graphic shows the various risks the EC and Governance Committees oversee:

• The Executive Committee has oversight over Financial Risk, Human Capital Risk, Strategic Risk
• The Operating Committee has oversight over Financial Risk, Technology Risk, Operational Risk, Legal & Compliance Risk, and Stakeholder Confidence Risk.
• Data & Technology Committee has oversight over Technology Risk.
• People & Culture Committee has oversight over Human Capital Risk
• Common Supervisory Services has oversight over Supervisory Risk
• Business Risk Committee has oversight over Supervisory Risk, Strategic Risk, and Regulatory Framework Risk

Executive Committee

Mandate

As senior stewards of the organization, the Executive Committee (EC):

• Sets the tone and tenor for the organization, by defining and modelling OSFI’s vision, values, and culture;

• Defines OSFI’s strategic direction;

• Sets risk appetite and tolerance, and maintains oversight of enterprise risks;

• Ensures sound internal controls to allow effective and accountable operations, and

• Protects and maintains trust and confidence in OSFI.

EC Scope of Decisions and Governance Interplay

Text Description - EC Scope of Decisions and Governance Interplay

Executive Committee
Approvals related to:	Advice & Guidance:
Corporate values and culture Strategic Plan Setting risk appetite and tolerance Budgeting and finances Key internal controls and mgmt. action plans in response to audits Org. structure and structure of governance Sr. Mgmt. staffing and talent mgmt. Strategic communications	Executive Sponsor is a resource to Governance Committee before escalation to EC Effective delegation both to Sr. Mgmt. Committees and individual senior managers EC provides clarity when delegating a decision vs. recommendation, and feedback on what information is required when coming back to the EC
Governance Committees

Types of EC Meetings

Regular EC Meetings

• The EC is a standing committee and will have regular meetings once a month, with the exception of July. EC members are expected to make every effort to attend.

• Regular EC agenda items are for decision or soon-to-be decisions. Items that are not for decision may be added at the Chair’s prerogative.

• These meetings have an agenda, and minutes and RoD (Records of Decision ) are documented.

• Each agenda item is assigned an executive sponsor; the EC member ensures appropriateness of agenda item, clarity of request being made to the EC, and timeliness of material submission (1 week prior to EC meeting).

• These meetings are to make decisions that have implications across most or all Sectors and require input from all EC members.

Special EC Meetings

• Occur outside of the regular EC meeting schedule, as needed (e.g., to coincide with the annual budget and planning cycle).

• Address the annual budget and planning process, annual HR processes, and special enterprise-wide projects or events.

• RoD are documented and submitted by presenter(s) for approval.

• Require the participation of all EC members.

• These meetings are to make decisions that have implications across most or all Sectors and require input from all EC members.

Thematic EC Meetings

• Ad-hoc meetings pertaining to EC input or decisions on major regulatory and supervisory projects and issues.

• All EC members are invited, but only EC members whose sectors are closely engaged are expected to participate.

• RoD are documented and submitted by presenters(s) for approval.

• Advisory, decision-making, or informational (depending on project topic and maturity).

Executive Roundtable (ERT)

• ERT is held once a week or more for an operational round-table discussion. Decisions are not usually made at the ERT, however if decisions are required, they will be recorded at the next Regular EC meeting.

In all meetings, EC provides clarity when delegating a decision vs. recommendation, and feedback on what information is required when coming back to the EC. Additional meetings may be scheduled at the discretion of the Superintendent on an ad-hoc basis.

Risk Management within Governance

Through the Enterprise Risk Management (ERM) Framework, the Executive Committee and Senior Governance Committees have coverage over multiple risk lens.

Text Description - Risk Categories

This graphic shows the various risks the EC and Governance Committees oversee:

• The Executive Committee has oversight over Financial Risk, Human Capital Risk, Strategic Risk
• The Operating Committee has oversight over Financial Risk, Technology Risk, Operational Risk, Legal & Compliance Risk, and Stakeholder Confidence Risk.
• Data & Technology Committee has oversight over Technology Risk.
• People & Culture Committee has oversight over Human Capital Risk
• Common Supervisory Services has oversight over Supervisory Risk
• Business Risk Committee has oversight over Supervisory Risk, Strategic Risk, and Regulatory Framework Risk

Senior Governance Committees

Overview

In support of OSFI’s Strategic Plan goal 3 (agility and operational effectiveness), governance ensures transparency and accountability in OSFI’s decision-making and supports strategic alignment of corporate decisions. More specifically, it determines who has power, who makes decisions, how other players make their voices heard and how account is rendered.

Governance Committees

Senior Governance Committees are co-chaired by members of senior management, Senior Directors (REX-09), which are appointed by the Executive Committee on a rotational basis. Members consist of OSFI senior management, Managing Directors (REX-08), and above. These committees meet monthly.

Operating Committee (OC)

Provides guidance, strategic direction and monitoring of operational files not covered in other committees, including accommodations, physical and cybersecurity, enterprise information management, enterprise risk management, and oversight of business and financial planning.

People & Culture Committee (PCC)

This committee will shape, support, evolve and promote OSFI’s human capital and culture. It will in form decision-making on enterprise-wide strategies to ensure that OSFI has the right people in place with the right skillset to achieve its objectives.

Data & Technology Committee (D&TC)

Takes an enterprise view of OSFI’s business needs and associated data and technology requirements, and provides strategic guidance and decisions to ensure OSFI has the data and tools it needs to do its work. The D&T Committee provides strategic oversight of the OSFI Data and IM/IT Strategies and ensures alignment to OSFI’s Strategic Plan.

Other Governance Committees

Other governance committees, such as CSSC and BRC are unique hybrids of both executive leadership and senior management governance. These committees are chaired by the Superintendent (BRC-TRI), or Assistant Superintendents, with senior management as members.

Common Supervisory Services Committee (CSSC)

Ensures that Common Supervisory Services (CSS) provide the services required by DTSS, ISS, and RSS as it relates to technology and tools, training, methodology, and consistency.

Business Risk Committee (BRC)

Oversees the development of holistic, ”One Office” strategies and initiatives to address horizontal, cross-sector industry-wide risks. Supports the Sector heads in fulfilling their vertical responsibilities by providing a comprehensive view of risks and their impacts on the financial sector.

Specifically, discuss and prioritize the top horizontal risks facing FRFIs and FRPPs. Evaluate options for integrated plans to respond to the triaged risks; form the basis for a top down approach to planning and resource allocation, and assess impacts on other priorities. Use these as input to annual supervisory planning and review activities.

BRC will be one single committee, which will meet monthly; rotating between the three functions, but the focus and frequency of the committee meetings may vary depending on what is required organizationally. This governance structure will be scalable and flexible enough to meet future crisis needs, we will adjust meeting cadence and focus as necessary.

• Macro Risk Oversight Function (BRC-MAC)

  BRC-MAC will develop a horizontal perspective on a broad range of key risks, and discuss and prioritize the top risks facing FRFIs and FRPPs. These meetings will be held about four times a year and will be chaired by the Assistant Superintendent, Risk Support Sector. Although RSS will provide substantive input for these meetings, other sectors will contribute as appropriate. This will include exploring and aligning the mandate and function of the Emerging Risk Committee (ERC) to support the BRC.

• Risk Triage and Response Function (BRC-TRI)

  BRC-TRI will triage the highest priority risks, and evaluate options for integrated plans to respond to the triaged risks. These discussions should form the basis for a top down approach to planning and resource allocation, and assess impacts on other priorities. These meetings will be held five times a year and will be chaired by the Superintendent.

• Integrated FRFI monitoring and planning function (BRC-SUP)

  BRC-SUP will use the outputs from the other two functions as input to an annual “blue sky” discussion focused on potential future supervisory activities, and an annual review of the past year’s supervisory results and forward supervisory plan. These meetings will be Co-Chaired by the Assistant Superintendents of DTSS and ISS.

Consistent with our leadership principle of collaboration, the membership of the BRC includes all sectors. Members include all of EC, the SDs, and the Chief Actuary. The MD of PPPD and the Chief Audit Executive are invited as observers, and additional observers will be permitted at the discretion of the Chair.

The following BRC meeting schedule outlines the cadence and frequency of meetings:

Text Description - BRC Meeting Schedule

This graphic shows the meeting frequency and cadence of the three BRC committees.

BRC-MAC meets 4 times a year

BRC-TRI meets 5 times a year

BRC-SUP meets two times a year

Each BRC-MAC meeting serves as input into the next BRC-TRI meeting.

The annual Risk Triage & Response meeting serves as input into annual BRC-SUP planning kick-off meeting.

Note: each meeting uses the outputs of the previous meeting to coordinate and integrate information, knowledge, and decision-making through one governing body which is then used in vertical decision-making.

Strategic Governance Office (SGO)

The Strategic Governance Office (SGO) is under the Directorate of the Strategic Governance, Access to Information, and Privacy, which is within the Communications and Corporate Affairs Division. The Strategic Governance Office supports the governance committees with professional service that facilitates coordinated and integrated decision-making and committee secretariat support.

For every committee meeting, SGO produces bilingual “key messages” and a “meeting summary” of discussion and record of action items and decisions. There is a monthly Senior Governance Committee dashboard, and quarterly Gears of Governance newsletter, both published for all staff on @OSFI.

The Audit Committee

Mandate Highlights

The Audit Committee is advisory to the Superintendent, providing objective advice and recommendations regarding the sufficiency, quality, and results of assurance on the adequacy and functioning of OSFI’s risk management, control and governance frameworks and processes, including accountability and auditing systems. The Committee also provides such advice and recommendations as may be requested by the Superintendent on specific emerging priorities, concerns, risks, opportunities, and/or accountability reporting.

Members & Candance

The Audit Committee is appointed with 4 external members and chaired by Mr. Frederick W. Gorbet. The Superintendent, the Chief Audit Executive and the Chief Financial Officer also attend every meeting. Detailed biographies of the external members are posted on the OSFI site at the above link. Committee meetings are held in-person and virtually at least 5-6 times a year. A scheduled work plan established at the beginning of the fiscal year directs meeting agendas. Meeting minutes are made available internally to OSFI staff.

Audit Committee Member Biographies

Audit Reports

As an internal business practice, management action plans developed in response to audit reports are sponsored by the Superintendent for approvals by the Executive Committee prior to being tabled for approvals by the Audit Committee.

OSFI Community

OSFI encourages building a strong sense of high-involvement community. While there are several ways to employees to get involved, the Superintendent shows support by participating in the following community-building work streams and events.

Inclusion Network (iN)

History

Founded in early 2017 as a “Grass Roots” initiative led by Ben Gully as Chair and Executive Sponsor, together with five “Founding Members” (all OSFI leaders).

Role

Provide strategic direction and leadership to OSFI’s diversity and inclusion initiatives:

• Promote awareness and understanding of D&I and encourage inclusive behavior

• Support relevant aspects of OSFI’s Human Capital Strategy by integrating D&I with wider OSFI initiatives

• Overseeing the activities of the IN Streams

Composition

• OSFI’s Culture and Community Champion (Ben Gully)

• Co-Chairs (Lydia Kimumwe and John Preiato)

• Secretary (John Pehar)

• Stream (co-)leads for the:

• Accessibility and Accommodation Stream

• Diversity of Thought Stream

• Family Responsibility Stream

• Gender Stream

• LGBTQI2S Stream

• Mental Health Stream

• Multiculturalism Stream

• Unconscious Bias Stream

• OSFI Official Languages representative

• OSFI Employment Equity representative

• OSFI HR representative

• OSFI Communications representative

• Representative from OSFI’s Vancouver and Montreal offices

• IN Founding Members

Key Achievements

• Launched eight D&I streams, comprised of volunteers across OSFI, each meeting regularly

• Engaged with all OSFI staff in two virtual Town Hall meetings with very high attendance. Feedback was sought on the future direction of D&I at OSFI.

• Organized a large number of D&I-related events during 2019-20, including:

• Celebrations of days of significance

• Discussion sessions

• Q&A panels

• Guest speakers

iN Council Five-Point Plan (short-term)

GCWCC: Government of Canada Workplace Charitable Campaign

To coincide with the broader fundraising efforts of the Government of Canada, OSFI initiates an annual fundraising campaign through the United Way entitled the “Government of Canada Workplace Charitable Campaign” (GCWCC). This event in typically launched in early Fall and has been a successful event year after year as a result of the generosity of OSFI staff.

Aside from personal donations through payroll deductions, OSFI staff also participate in a number of fundraising initiatives that have a social/fun aspect to them. These initiatives can be region-specific or cross-office.

Typically, a member of Executive Committee volunteers to serve as the EC sponsor (for the 2020 GCWCC Campaign, this was the Assistant Superintendent, RSS). The PCC oversees the launch of the GCWCC organizing committee which must include members from all 4 regions and sectors.

OSFI Week

OSFI Week is an annual event, the timing of which coincides with the broader National Public Service Week (NPSW). The NPSW was created in 1992, following the passage of the National Public Service Week: Serving Canadians Better Act, to recognize the importance of federal public service employees and to honor their dedication to Canadians. In accordance with the Act, the third week of June is known as National Public Service Week in Canada. In 2021, this week will take place from June 13 -19.

OSFI Week provides an opportunity for OSFI staff to participate in social events and also includes the annual OSFI Town Hall whereby EC members deliver key messages to the broader OSFI community (i.e., OSFI Values, DEI Initiatives, etc.) and to present the OSFI Awards to chosen nominees. Pre-pandemic and to the extent possible, staff from other regions gathered in Toronto (to coincide with planned work) to attend the OSFI Town Hall in person. As a result of the pandemic, in 2020 the event was entirely virtual and was well-received. A virtual event is again being planned for June 2021.

A range of social events planned during OSFI Week provide an opportunity for OSFI staff to network. Events are planned throughout the week and are held in all 4 regions (in some cases, simultaneously). Past social events have included a scavenger hunt, pot luck, virtual coffee randomizer, organized walks, etc. Members of OSFI’s Inclusion Network also typically host an event during this week to promote DEI awareness. All events to date have been well-attended, inclusive and low-no cost.

An organizing committee of volunteers is formed early in the calendar year to plan and arrange these events. This group works closely with Communications which is responsible for organizing the Annual Town Hall to ensure consistency of messaging, timing of events, etc.

The PCC oversees the work the organizing committee and assigns a PCC member to sponsor and support their work. The Toronto and Ottawa chairs of the organizing committee attend monthly PCC meetings leading up to OSFI week to provide an update on progress.

ATIP & Disclosures

ATIP, Proactive Disclosure, and Privacy

Access to Information

The Access to Information Act (ATIA)

The Access to Information Act (ATIA) provides Canadian citizens, permanent residents, and individuals and corporations present in Canada a right to access records under the control of government institutions, in accordance with the principles that government information should be available to the public, that necessary exceptions to the right of access should be limited and specific, and that decisions on the disclosure of government information should be reviewed independently of government. There are approximately 260 government institutions currently subject to the ATIA.

Responsibilities & Reporting Structure

The Access to Information and Privacy (ATIP) Unit is part of the Strategic Governance Directorate within the Communications and Corporate Affairs Division. The unit is responsible for administering the Act for the Office of the Superintendent of Financial Institutions (OSFI). As such, the ATIP unit coordinates the timely processing of requests under the legislation, handles complaints lodged with the Information Commissioner, responds to informal inquiries and is responsible formatters relating to Proactive Disclosure. The ATIP unit also provides advice, guidance and training to Office staff and project teams on matters involving the Act.

The Manager, Privacy and Access to Information reports to the Director, Strategic Governance, Access to Information and Privacy Office, and is supported by a Senior ATIP Officer, an ATIP Officer and a Junior ATIP Officer. The Senior ATIP Officer – Open Government position was created and staffed in preparation of Bill C-58 receiving royal assent in June 2019. The ATIP unit also relies upon the support of contract resources. Prior to April 1st 2021, the ATIP team was part of the Enterprise Information Management (EIM) Directorate.

ATIP Process & Overview

All formal Access to Information requests are submitted to the Manager, Privacy and Access to Information, who reviews and assigns them to an ATIP Officer. The Officer requests the information from the appointed sectoral ATIP Liaison Officer(s) concerned. In gathering the material and subsequently reviewing it, the ATIP Office provides advice and direction to ensure that the provisions of the Act are respected.

Assembled material is reviewed by the ATIP Officer and the Manager, Privacy and Access to Information. The material and the recommendations pertaining to each request are then submitted to the program area for validation. Once agreed to, the release package is submitted to the Assistant Superintendent, Corporate Services for review and approval.

Proactive Disclosure

Bill C-58

Bill C-58, An Act to amend the Access to Information Act and the Privacy Act received royal assent on June 21, 2019, making important improvements to the openness and transparency of government. These are the most significant amendments to the act since it came into force in 1983 and represent the first phase of the review of the Access to Information Act. Phase II, currently underway, will be a full review of the Act.

For most OSFI employees, the most significant impact of bill C-58 relates to proactive disclosure, that is to say the voluntary publication of certain types of information in accordance with legislated timelines. The most frequently published types of information are:

• Contracts with a value over $10,000 (published quarterly)

• Travel & Hospitality expenses (Superintendent and Assistant Superintendents, published monthly)

• Briefing Packages for Parliamentary appearances by the Superintendent (as required)

• Reports tabled in Parliament(as required)

• Briefing Note titles (memoranda for the Superintendent or the Minister, published monthly) and;

• Briefing materials prepared for incoming deputy head (as required)

Delegation of Authority and Superintendent’s Responsibilities

The responsibility for final and/or Information Management Senior Official (IMSO) approval prior to the release of a completed ATI request or publication of materials prescribed under Proactive Disclosure currently rests with the Assistant Superintendent, Corporate Services by virtue of the Access to Information Act Designation Order. The Superintendent will be responsible for authorizing an updated Access to Information Act Designation Order upon assuming their role. The Superintendent is also currently responsible for the monthly OPI review of all Briefing Note titles originating from the Superintendents’ office. An overview of the process and the related eSpace workflow functionality will be made available to the superintendent at their earliest convenience.

Privacy

The Privacy Act

The purpose of the Privacy Act is to extend the present laws of Canada that protect the privacy of individuals with respect to personal information about themselves held by a government institution and that provide individuals with a right of access to that information.

Responsibilities & Reporting Structure

The Privacy Unit is part of the Strategic Governance Directorate within the Communications and Corporate Affairs Division. The unit is responsible for administering the Privacy Act, regulations and related policies as well as providing input and support to IM/IT projects through the preparation of privacy impact assessments and, in the case of personal information used for anon-administrative purpose, privacy protocols. Staffing is currently underway to hire 2 Privacy Officers to support this role. The Privacy Unit also provides advice and guidance to Office staff on matters involving the Act. Prior to April 1st 2021, the Privacy team was part of the Enterprise Information Management (EIM) Directorate.

Employee Development

Senior Leadership Vision

Background - Objectives & Approach

Phase 1

• The first Senior Leadership Summit was held in December 2019

• The initial Senior Leadership Vision was defined as:

  1. The staffing of senior REX Positions will be a key EC responsibility
  2. Senior REX appointments are made purposefully
  3. Senior REXs are mobile and have a versatile skill set

• EC has since been making a number of hiring decisions and rotations guided by that vision

Phase 2

• Insights from our Senior Leaders regarding the vision and our leadership culture were collected between October 2020 and February 2021 through a series of Skip-level meetings with Jeremy, Self Assessment and Workshops

• This process resulted in the identification of clear themes which were presented to EC

Phase 3

• The results of the insights were shared with all Senior Leaders and formed the basis of the 2nd Senior Leadership Summit on February 23, 2021

• As part of this Summit, Senior Leaders discussed ways to address the identified gaps and committed to taking some actions some of which now form part of the 2021-22 Performance Management Cycle

• An overview of the Mimosa Project and the insights collected were shared with OSFI Directors as part of the Leadership Summit in March 2021 where all OSFI REXs were invited

What's Next

Phase 4

• In progress - Summarize action commitments to Senior Leaders and next steps

• June - completed - Project Closeout report. Full report available upon request.

  In summary, the insights from the skip level meetings, self-assessments and workshop discussions were summarized into three focused areas. These focused areas represent a common view from the Senior Leader Community. As part of the Senior Leadership Summit, Senior Leaders discussed ways that they can exercise their leadership differently to enable OSFI's success (see below).

  To strengthen accountability, the outcome of the Senior Leadership Summit dialogue formed the basis for the development of the Corporate Leadership Commitments. The commitments are being included Goal Commitment Documents of REX-08+ for 2021-2022.

  As Senior Leaders, we will seek innovation over the status quo, efficiency over perfection, and transparency over harmony.

  • Innovation over Status Quo
  • Efficiency over Perfection
  • Transparency over Harmony

• In progress - Share with OSFI staff highlights of the project, key takeaways, commitments and next steps

Human Capital Strategy

Overview

Background

In 2017 OSFI launched a multi-year Human Capital Strategy (HCS), which provides an overarching famework for the people management priorities important to OSFI. It sets the direction on how we lead and manage our people, develop skills and encourage continuous learning, provide mobility and opportunities for advancement, and attract new talent to our organization.

The HCS is linked to OSFI’s Strategic Plan (2019-2022), under Goal 3: OSFI’s agility and operational effectiveness are improved. The purpose of Goal 3 is to ensure we have the right people, skills and infrastructure to meet the needs of the organization and we are able to leverage them in a timely and effective manner.

The HCS initially defined five priority areas important to building, developing and supporting human capital, and ensuring policies and practices were aligned. The five priority areas include: Leadership Development; Talent Management; Learning and Development; Culture and Community Building; and, Enterprise Change Management.

In 2021, a 6th pillar was added to the HCS to reflect and guide commitments under the Hiring and Promotion review, which examines our hiring policies and practices to address potential bias, and improve representativeness. This review is part of the broader Diversity, Equity, and Inclusion (DEI) initiative.

In the coming year we plan to being the work to design and develop a new HCS with direction from the People and Culture Committee (PCC), Executive Committee (EC), and the new Superintendent. This work will include the conduct of a full review to identify priorities for the future, including the post-pandemic environment which will have a transformative impact on our workplace, workforce and leadership.

HCS Pillars

The following six pillars form part of the HCS. Details about each Pillar are summarized directly below.

• Leadership Development

• Talent Management

• Learning and Development

• Culture and Community Building

• Enterprise Change Management

• Workforce Planning (Addendum)

In addition to the HCS, a Roadmap was developed to provide a snapshot of the activities identified under each of the six pillars. It includes a status update on the work initiated from 2017 to present, and lists work that is ongoing or to be completed. Work approved under the Hiring and Promotion action plan has been included under the Workforce Planning pillar.

Pillar 1:

Leadership Development

• Several activities form part of the Leadership Development pillar and these include the Leadership Development Program (LDP) for Executives, peer coaching sessions; leadership development training such as managing through change; building better work-from-home habits; resilience; a learning series on diversity, equity and inclusion; and understanding emotional intelligence (EQi). OSFI people managers also have access to in-person and virtual bilingual coaching services, and tools and training to become better coaches themselves. OSFI’s 360 Assessment Program is available to people managers at all levels.

• As part of the Leadership Development, OSFI custom designed the Leadership Role Model (LRM) to set leadership expectations and foster a strong leadership culture, specifically Integrity, Collaboration, Agility and Transparency. OSFI has undertaken a review of its Leadership Competency Model (LCM), applicable to RE employees and the LRM. The objective of the review is to integrate the two models, while accounting for the different competencies based on stream: management of people or technical.

• OSFI has a Management Essentials Program (MEP) and accompanying Manager’s Toolkit for new RE people managers. Part of a comprehensive leadership approach, the program is unique to and designed by OSFI, and expands on OSFI’s leadership continuum. Since the launch, the target audience has expanded to RE employees who not only have direct reports, but who also lead people in other capacities of their work, such as project work or job-related tasks. In 2020 this program was supplemented with the Managing Virtually Program which focuses on three key management pillars in a virtual work environment: Communication, Well-Being and Managing to Results.

Pillar 2:

Talent Management

• OSFI has in place a cyclical Talent Management program for REXs with a core focus on identifying and developing talent. The program also looks at taking steps to support and develop talent for future succession. The program runs annually and Managers engage in talent discussions with their employees to review placement on a talent map, discuss the employee’s interests, and identify plans for further development. These discussions are held separately, and in addition to performance management discussions.

• In 2019 OSFI launched pilots to expand the Talent Management program to the RE group of employees. The goal is to develop and implement an enterprise wide RE talent management program, including defined career paths, and mobility and opportunities for development of all REs.

Pillar 3:

Learning & Development

• Continuous learning is a key element of OSFI’s Learning and Development Pillar. As part of the performance management cycle, employees and managers engage in an annual Learning Plan development exercise to identify learning needs and interests. OSFI monitors its corporate commitment to learning, and has a target of an average of 5 days of training per employee.

• In 2017 OSFI launched its Supervision Training Initiative (STI), which was a broad, multi-year initiative focused on developing technical training for financial supervisors. The STI transitioned to CSS Training, upon the formation of the Common Supervisory Services (CSS) group. Thus far offerings include 75 technical learning modules for supervision-sector employees in both official languages and an updated Supervisory Framework course that enhances both knowledge and application skills of the participants. All new Supervisors are required to take the 12-month Supervisory Foundations Program. All of the training materials are accessible to all supervisors via the CSS training portal on @OSFI.

• More recently, Learning and Development worked with an external consultant and collaborated with OSFI partners and stakeholders to develop a comprehensive Learning and Development Strategy to ensure our investments build the desired people capabilities and support the achievement of key business and talent objectives. [Information was severed in accordance with the Access to Information Act].

Pillar 4:

Culture and Community Building

• Under the Culture and Community Building Pillar, OSFI’s goal is to build pride and recognition within the organization, create opportunities for community building and networking, support employee wellness and wellbeing, and Develop a Diversity, Equity, and Inclusion (DEI) Strategy.

• OSFI conducted a Culture Assessment in 2019-2020 to understand our desired state and inform future efforts. In FY 21-22, OSFI will initiate a review and update of the Culture Assessment, and use it to inform its policies and practices on a number of fronts related to DEI, PIVOT (Future of Work and Workplace), and people management.

• OSFI has a robust Recognition Program, which includes enterprise-wide OSFI Awards (OSFI Values in the Workplace, One Office Workplace), as well as recognition for specific award categories under Sector Awards. In 2020, the Superintendent launched the Superintendent Coins, which are commemorative coins awarded to employees who continuously strive to support OSFI’s Strategic Plan goals.

• The Inclusion and Diversity Network, a grassroots initiative, was created to raise awareness and celebrate diversity. It includes events in various streams such as Unconscious Bias, Gender, Multiculturalism, LGBTQI2S, Family Responsibilities, Diversity of Thought and Mental Health and Wellness.

• In support of OSFI wellness, during the pandemic HR launched a Wellness series that includes several guides, webcasts, and information sessions offering a myriad of tools, and resources to employees to raise awareness around mental health and wellbeing, and provide support [Information was severed in accordance with the Access to Information Act].

• More recently, OSFI has taken steps to formalize its approach to embedding DEI into the very fabric of its culture. Additional details about DEI are available in the DEI section.

Pillar 5:

Enterprise Change Management

• Under the Enterprise Change Management (ECM) pillar, the objective is to make managing change a normal part of how OSFI gets things done. In 2017-18 OSFI launched its ECM Framework, which provides the processes and tools for managing the people side of change at the initiative and portfolio levels. Training was rolled out to develop leadership and staff ability to lead, support and receive change. To facilitate the application of the ECM Framework, OSFI created the “ECM Leads Network”, with representatives from each Sector. The Leads Network are advocates for the ECM Framework. In addition, they are responsible for providing input on the Framework and guidance to support its application. OSFI also engages part-time ECM experts (3rd party resources) to provide advisory services (i.e., guidance and expertise on change management and ECM Framework application).

• Since launching the ECM pillar, there have been positive signs of progress, including:

• An increased awareness of the importance of change management, in particular as it relates to larger initiatives

• Improving results with OSFI’s ability to communicate organizational changes and to offer support to employees going through change

• The Framework and tools are viewed as useful

• The ECM Leads Network made progress with understanding change initiatives and their impact on the organization

• ECM training ramped up markedly in 2019-20, which resulted in strong coverage throughout the organization

Pillar 6:

Workforce Planning

• The Workforce Planning Pillar was introduced in 2021, under the Hiring and Promotion review, as part of a commitment to examine our hiring practices. The review is now complete, and work has begun to implement a phased action plan which aims to further improve our hiring practices, educate our managers, offer more support to employees in their career journey, and increase transparency and representativeness by identifying and removing potential barriers or biases.

Leadership Role Model

The Leadership Role Model (LRM) was custom designed for OSFI’s leaders to set leadership expectations and foster a strong leadership culture. It is built on the OSFI competency model and identifies what people managers need to aspire and commit to in order to be a successful and inspiring leader. The Leadership Role Model is intended to help leaders:

• Model a consistent expression of leadership
• Execute on the organization’s strategy and vision
• Empower leadership and people
• Promote the values of the organization

The LRM lays out the overarching behaviors that enable leaders to live the OSFI values in the context of leadership. It reflects the uniqueness of OSFI and what its leadership should be, both individually and collectively, all the time and across all people manager jobs. It is intended to work as a lever for consistent leadership culture while making room for diverse applications and context.

The model forms the underpinning of our leadership development program and in so doing, provides an opportunity for leaders to explore how they can model the behaviors in day-to-day execution of their roles. It will also be increasingly used to inform talent management discussions and performance management feedback as it becomes embedded in the organizational various processes and culture. Coupled with our OSFI competency model, the LRM will enlighten potential growth of individuals and develop OSFI as a high performing organization, reaching new heights.

Text Description - Leadership Role Model

Collaboration
Sharing a community mindset, promoting cohesion and breaking down barriers

• I will promote collaboration and partnership in teams and amongst peers by creating an inclusive environment
• I will proactively remove silos and barriers that impede working together
• I will regularly seek and provide feedback to enable greater alignment and understanding, supporting one office

Agility
Adapting to environmental complexities through innovation

• I will develop a fail-safe environment by supporting smart and accurate risk taking
• I will leverage diverse ideas and progressive ways of thinking
• I will actively develop people, lead change and create agile teams

Transparency
Cultivating an open trustworthy culture within the organization

• I will model transparency, openness and diversity of thought
• I will coach towards and actively promote an inclusive environment of respect, dignity and understanding
• I will communicate with honesty and clarity

Integrity
Stepping up to the obligations of leadership with authenticity

• I will hold myself and others accountable to a results-oriented approach
• I will step up to the hard work leadership including having crucial conversations
• I will role model and inspire courage, resilience and compassion in our decisions

Leadership Development Program

Background

One of the key priorities under Leadership Development in the Human Capital Strategy is to develop and implement a comprehensive Leadership Development Program (LDP) for our organization. Working closely with our partners at Lee Hecht Harrison Knightsbridge (LHHK), we delivered on that commitment by launching the LDP program with our first cohort of participants on May 15th, 2018.

The impetus for creating the program came from OSFI employees. Our annual employee survey results and Human Capital Strategy consultations showed a lot of strength among OSFI leadership when it came to technical skills, but also revealed a few important gaps when it came to other types of skills, like communication, providing feedback to employees, and acting on feedback from employees.

We also saw that leaders needed to be more connected—to each other and to our corporate vision and values. LHHK helped us pinpoint our leadership needs with focus groups and build out a program that would meet these needs.

This program was designed to reinforce leadership and behaviors that will help OSFI to inspire through its vision, achieve on its mission and demonstrate its values to internal and external stakeholders. Through proven and practical content, managers will develop the mindset, skill set and apply approaches and tools to enhance the performance and engagement of their teams.

Program Objectives & Architecture

The LDP focuses on building participants’ skills and confidence as leaders. It is designed through building blocks to increase capacity in personal, team and organizational leadership. Specifically, it will help participants:

• Gain self-awareness around their personal style and impact on others

• Assume the accountabilities of a leader in OSFI today and tomorrow

• Focus their time and energy for maximum impact

• Develop people and high performing teams

• Represent their organization as a communicator and agent of change

The program includes a variety of elements designed to encourage, support, and sustain learning:

• Program Orientation for participants in the cohort and their managers

• DiSC® Assessment

• Pre-Work and Field Assignments

• Learning Modules (divided into three Building Blocks)

  • Block 1: Personal Leadership
  • Block 2: Setting up teams for success
  • Block 3: leading through change

• Peer Coaching Sessions

HR

Classifications & Organizational Design

Legislation

The authority to provide for classification of positions within OSFI stems from the OSFI Act which states the following:

“…the Superintendent is authorized to exercise the powers and perform the functions of the Treasury Board that relate to human resources management within the meaning of paragraphs 7(1)(b) and (e) and section 11.1 of the Financial Administration Act (FAA)”

Whereas section 11.1 of the FAA states:

11.1 (1). “In the exercise of its human resources management responsibilities under paragraph 7(1)(e), the Treasury Board may (b) provide for the classification of positions and persons employed in the public service.”

Therefore, via powers and responsibilities listed under the OSFI Act, the Superintendent of the Office of the Superintendent of Financial Institutions is authorized to provide for the classification of positions and persons employed at OSFI.

Sub-delegation

Classification Authorities

The Superintendent has sub-delegated classification authorities as follows:

Governance & Oversight

The Job Evaluation Committee (JEC) is OSFI's governance and oversight body on classification (job evaluation) activities.

Classification oversight activities maintain the integrity of the Classification Program by ensuring:

• the effectiveness of classification decisions through ongoing and systemic auditing

• that relativity is respected and maintained

• that anomalies are identified through diligent monitoring and review

• that corrective action is taken to ensure the consistent application of job standard(s)

• that a quarterly report is prepared for review by the JEC

• that an annual Monitoring and Review Plan is prepared

The Manager Organization Design and Classification ensures the integrity of OSFI's Classification Program through monitoring and review activities and a regular reporting cycle to the Chief HR Officer and the Job Evaluation Committee (JEC).

Classification Standard and Levels at OSFI

OSFI applies one (1) classification standard for all positions; namely the Hay Methodology. The Hay Methodology is a form of factor comparison that has been used by thousands of organizations all over the world to evaluate all different types of jobs. It is the standard used by the Canadian Human Rights Commission to study pay equity complaints and also used by the Bank of Canada, Canada Mortgage Housing Corporation, Canada Deposit Insurance Corporation, Royal Canadian Mint, Export Development Canada, and the core public service (for EX positions).

Under OSFI’s classification system, positions fall in one of two broad categories: RE or REX, which are further broken down as follows (note that while these are typical titles it is not intended to be an exhaustive list and some titles may span more than one level depending on the discipline).

Organizational Design

The image below illustrates the delineation between the senior director leadership and the OSFI executive committee in the context of job classification levels.

Text Description - Organizational Design

This graphic shows the job classification hierarchy:

Deposit-Taking Supervision (REX-11)

• Senior Director SMSB (REX-09)
• Senior Director SIB (REX-09)

Insurance Supervision (REX-11)

• Senior Director PCG (REX-09)
• Senior Director LIG (REX-09)
• Senior Director AD (REX-09)

Risk Support (REX-11)

• Senior Director Financial Risk (REX-09)
• Senior Director Non-Financial Risk (REX-09)

Regulation (REX-11)

• Senior Director Capital Insurance (REX-09)
• Senior Director Regulatory Affairs and Strategic Policy (REX-09)
• Senior Director Capital (REX-09)

Risk Corporate Services (REX-11)

• Chief Information Officer (REX-09)
• Senior Director Comms & Corporate Affairs (REX-09)

Head, Common Supervisory Services

General Counsel (Department of Finance Employee)

Chief Audit Executive (reports directly to the Superintendent)

Office of the Chief Actuary (reports directly to the Superintendent)

Workforce Profile

Total Population

As of March 31, 2021, the OSFI total population stood at 915 employees, representing a 6.2% increase during this fiscal year. While the total

Text Description - OSFI Employees

This graphic shows the trend of OSFI Employees

• 2015-16: 701
• 2016-17: 712
• 2017-18: 746
• 2018-19: 782
• 2019-20: 862
• 2020-21: 915

The majority of employees are geographically located in Toronto and Ottawa.

Text Description - Employee Distribution by Location

This graphic shows the employee distribution by location:

• Van: 22
• Mtl: 20
• Ott: 400
• Tor: 463

There was an increase in all the sectors, the largest increase being in ISS (10.2%) followed by Regulation Sector (8.6%) and Corporate Services (8.1%). The “Other” category includes Common Supervisory Services (CSS), the Office of the Chief Actuary (OCA), Internal Audit, and the Office of the Superintendent. The largest sector by population, Corporate Services, represents approximately 29% of the OSFI workforce.

Text Description - OSFI Employees by Sector

This graphic shows the OSFI employees by sector:

OSFI Employees by Sector in 2019-20

• CS: 246
• RSS: 164
• REG: 139
• DTSS: 130
• ISS: 118
• Other: 65

OSFI Employees by Sector in 2020-21

• CS: 266
• RSS: 167
• REG: 151
• DTSS: 133
• ISS: 130
• Other: 68

In general, the distribution of employees has remained stable. The greatest concentration of employees continues to be at the RE 05 and RE 06 levels While the total number of REX positions grew in 2020-21, the proportion of the REX population in total at 18.4% has dropped slightly from last year (18.8%).

At March 31, 2021, the average age of OSFI employees was 45.8 years compared to 43.4 years in the Public Service in 2019-20. The average age of OSFI’s new hires at the end of the fiscal year was 40.9 years.

Annual Leave Usage

Vacation usage has dropped significantly from last year (12.5 vs.17.4 days) due to the pandemic. Travel restrictions are among the reason for the decrease in vacation leave usage. Also, work from anywhere makes things more flexible; employees may need less vacation being able to work from the location of their choice. There has also been a significant decrease in the average sick days taken (3.3 vs. 6.3 days). Since employees can work from home they are less exposed to illnesses and may attend virtual medical appointments without missing any work.

Turnover

The overall turnover rate dropped in 2020-21. The annual turnover rate the past four years was range-bound between 6.0% to 6.7%. The turnover rate for 2020-21 was 3.9%.

This may be attributed to the COVID-19 pandemic. Historically, employees who leave OSFI tend to leave for opportunities in the financial services industry, a sector impacted by the pandemic. During this unprecedented year, some employees may have postponed making career changes. The lower than usual voluntary turnover can be attributed to employees’ desire to maintain job security.

We also know anecdotally that some employees have decided to postpone their decision to retire due to the pandemic. This may have in part been due to greater flexibility offered to employees to work from home or anywhere in Canada. Employees were also afforded the opportunity to work flexible hours, depending on their personal circumstances.

Retirements

Of those employees eligible to retire, only a small number actually do. During 2020-21, 9.5% (87) employees were eligible to retire and 1.6% (15) of employees did so, consistent with past years. Note: retirement eligibility is not an exact forecast for departures given that many staff work past their eligibility date.

The eligibility for retirement is highest in the Insurance Support Sector where there is a proportionally higher population of employees over the age of 60years, which is the age when the pension eligibility rules become less restrictive.

Hiring & Promotion, Diversity, Equity & Inclusion

Hiring & Promotion

OSFI is currently engaged in a review of its hiring and promotion practices, as part of its larger commitment under the Diversity, Equity, and Inclusion umbrella. The purpose of the review is to safeguard against unconscious bias, and take deliberate steps to increase transparency around our hiring decisions and improve employment equity representation.

The review included an examination of our hiring policies and practices, along with understanding hiring manager and candidate experiences. While the review revealed that OSFI continues to be compliant with its legislative requirements, it identified areas where further improvements can be made to address employee perceptions and improve experiences. A responsive and phased action plan spanning 12 – 15 months was developed and shared with employees, and we are currently in the implementation phase.

Actions completed under the near-term include a review and update of OSFI’s Appointment Policy, Guide, and related training; update of the Human Capital Strategy and Roadmap; education on Employment Equity demographics and gaps by Sector; launch of a staffing planning process to identify vacancies and staffing strategies; review of people management competencies; and identification of additional academic institutions for co-op program.

In the mid to long term we will simplify the language in our job advertisements, update people management competencies, provide training to hiring managers on responsibilities related to Employment Equity, and develop resources for employees on how to navigate through the job application process. We will also pilot initiatives such as Employment Equity focused recruitment strategies, the use of standardized assessment tools, effectiveness of blind assessment, and use of cross-sector selection panel members. We will also review and align our Talent Management, Management Essentials, and Leading Virtually programs to identify and prepare leaders for the future.

The approach to the examination of our hiring and promotion processes and practices is designed to be agile using test projects and applying lessons learned along the way.

Details on actions taken in the near term, and actions approved for the mid-term and long-term can be found in the quarterly updates.

Diversity, Equity, and Inclusion at OSFI

Diversity, Equity, and Inclusion

OSFI has continued to advance diversity and inclusion in the workplace under the Community and Culture Building Pillar of the Human Capital Strategy. Initiatives under this pillar include events and activities that celebrate the diversity of our employees and the communities we live in. OSFI solicits feedback from its employees through Annual Employee Surveys to measure inclusivity, including experiences of potential discrimination. Equity is measured through OSFI’s annual Employment Equity report, and addressed through its three-year Employment Equity plan.

In July 2020, the Executive Committee (EC) affirmed its commitment to take a more comprehensive and systematic approach to building a more diverse, equitable, and inclusive workplace, with the goal of making it central to OSFI’s culture.

EC set out a way forward that includes:

• Executive Committee accountability for DEI at OSFI

• Oversight by the People and Culture Committee (PCC) for the development of a DEI Strategy

• Creating more space to grow and nurture grass roots or community-inspired diversity and inclusion efforts

In March 2021 OSFI introduced its DEI Accountability Framework which sets out the accountabilities and responsibilities of the 9 stakeholder groups involved in making DEI a central part of OSFI’s culture. The EC champions diversity, equity and inclusion at OSFI and has assigned the PCC to oversee the development of the DEI Strategy, along with Human Resources.

PCC will monitor the timely development, progress and completion of a DEI Strategy, by providing thought leadership, direction, and effective governance to the project team, and presenting regular progress reports to EC and all employees. The PCC’s current efforts are focused on setting direction and supporting the Human Resources Division with planning the work involved. In May 2021, a distinct DEI division was created within Human Resources; next steps in the development of the strategy are to conduct an inclusion diagnostic assessment, and update the Culture Assessment conducted in 2019. These pieces, along with a review of OSFI’s practices and policies, will inform the design and development of the DEI Strategy.

Employment Equity

The Employment Equity Act (EEA) requires OSFI to take action to ensure its workforce is representative of the four designated groups (women, Aboriginal peoples, persons with disabilities and visible minorities). OSFI is required to remove barriers to employment that disadvantage members of these designated groups. OSFI is also required to institute positive policies for the hiring, training, retention, and promotion of members of the designated groups and to annually compare the participation of the four designated groups in their workforce against those with similar skills in the Canadian workforce.

As per the requirements established in the EEA, OSFI prepares and tables an Annual Employment Equity Report to the President of the Treasury Board of Canada. This annual report highlights our employment equity activities, and presents information on the representation of the four designated groups within the Office. Furthermore, OSFI also has an Employment Equity 3 Year Plan 2020-2023, which was approved by the People and Culture Committee (PCC) in October 2020. In FY 2021-22, OSFI will launch a new Employment Equity self-identification campaign with refreshed definitions as identified by the Treasury Board of Canada.

Employment Equity Diversity Advisory Committee

OSFI has an Employment Equity Diversity Advisory Committee (EEDAC), which is made up of volunteers from each of the four designated groups as well as representatives from the two unions within OSFI. The EEDAC plays an advisory role in consulting on and monitoring of the Employment Equity Plan and Annual Report to help the organization achieve its goal of full representation.

Grassroots Initiative: Inclusion Network (iN)

At OSFI, DEI objectives are also supported by the activities of the Inclusion Network. OSFI’s Inclusion Network or “IN”, is a forum that brings together staff who are interested in promoting workplace inclusion and nurturing diversity of thought at OSFI. The IN is about creating an environment that expressly values the individual, where employees feel safe, involved, connected, and able to bring their whole self to work. It is about embracing, valuing and respecting our diversity.

The IN is made of eight diversity streams: Unconscious Bias, Multiculturalism, LGBTQI2S, Diversity of Thought, Gender, Accessibility, Family Responsibilities, Mental Health & Wellness. The streams organize activities and events to raise awareness, understanding and also support a sense of belonging.

Labour Relations Framework

Collective Bargaining

Employees (non-executive)

OSFI’s non-executive employees (classified as RE-01 to RE-07) are unionized and represented by two unions:

• The Public Service Alliance of Canada (PSAC) represents a small number of employees, classified at the RE-01 and RE-02 levels (around 20 employees comprising 2% of staff)

• The Professional Institute of the Public Service of Canada (PIPSC) represents the majority of OSFI employees, classified at the RE-03 to RE-07 levels (around 680 employees comprising 74% of staff).

As a Separate Agency, OSFI manages its own collective bargaining process with each of the unions. That said, the Collective Agreements are closely aligned with the Federal Public Service; deviation from the standard applied in the Federal Public Service requires approval from the Treasury Board Secretariat. This process is in place to provide consistency and alignment in employee rights and benefits across all federal government departments and agencies. Most of the provisions contained in OSFI’s collective agreements are in line with the Federal Public Service.

The PIPSC Collective Agreement was renewed in August 2019 and expires March 31, 2022.

The PSAC Collective Agreement expired March 31, 2018. OSFI is currently in discussions with the PSAC negotiator to resume negotiation.

Executive Cadre

The Executive cadre is not represented by union. Their employment is governed by the Terms and Conditions of Employment outlined in the Terms and Conditions of Employment for the REX Group. OSFI currently has 174 Executive cadre employees, which comprises 19% of staff.

Union-management relations

OSFI holds a strong and productive relationship with its union counterparts. A Union-Management Consultation Committee (UMCC) is in place, which consists of representatives from Management, both unions, and Human Resources. The committee is chaired by the Assistant Superintendent, Corporate Services Sector. This forum provides the opportunity for unions and management to discuss key files of interest. Members of the Human Resources team encourage open dialogue with union representatives in order to resolve issues early. Ongoing collaboration with the unions has contributed to a historically small number of formal recourse actions at OSFI.

Official Languages at OSFI

Policy

Official Languages Policy

OSFI is subject to the requirements of the Official Languages Act (OLA). In November 2012, Treasury Board Secretariat (TBS) approved a suite of four new official languages policy instruments, which consist of an Official Languages Policy, directives concerning people management and communications and services, as well as implementation of regulations regarding communications with and services to the Canadian public.

All positions at OSFI are identified as either unilingual or bilingual. Unilingual positions can be specified as either “English Essential”, “French Essential”, or “either English or French”.

OSFI primarily has Bilingual or Unilingual English Essential positions. OSFI does not have any “French Essential” positions. Bilingual positions require the use of both English and French, and the required second language skills. At OSFI, the Ottawa and Montréal offices are located in bilingual regions while the Toronto and Vancouver offices are located in unilingual regions. In regions designated bilingual for language-of-work purposes, OSFI is responsible to ensure that the work environment is conducive to the effective use of both official languages and that its employees may exercise their right to use either language, subject to the obligations to provide service to the public or personal and central services to OSFI employees.

In bilingual regions, all employees must be provided with regularly and widely-used work instruments (e.g. manuals, policies, procedures, directives, handbooks, forms, templates, lexicons, etc.) and electronic systems in both official languages. In unilingual regions, employees must be provided with regularly and widely-used work instruments in both official languages if they are required to communicate or provide services to the public or employees in English and French.

OSFI has an Official Languages Committee and Official Languages Champion (chair) whose purpose is to promote linguistic duality in the workplace, and to provide input and advice to HR and management on meeting the requirements of the OLA, the Government’s official languages policy, and OSFI’s own official languages objectives (e.g., OSFI’s Official Languages Action Plan). The Committee is accountable to the Chief Human Resources Officer, Human Resources Division, who provides periodic updates to the People and Culture Committee on the Official Languages Committee’s activities.

Language Training

Language training at OSFI is funded centrally, under the Learning & Development Division, for the following categories of employees:

• Employees appointed on a non-imperative basis to bilingual positions (statutory requirement); and

• Incumbents of newly designated bilingual positions or of bilingual positions where the linguistic profile has recently been raised, and who do not meet the required official language proficiency level.

All other language training is funded by the employee’s cost centre, and includes those who wish to take language training for career development purposes or to maintain their existing proficiency. Employees would discuss their goals with their manager as part of the development of their learning plan. The manager is responsible for approving the training in light of various factors such as the employee’s learning needs and goals, operational requirements, and budget constraints.

The training options available to employees are full or part-time tutoring and virtual group lessons, as well as online learning resources. The Learning and Development Division can provide advice on the best available option for the employee based on the individual learning needs.

Employee Survey

https://epe.lac-bac.gc.ca/100/200/301/pwgsc-tpsgc/por-ef/office_superintendent_financial/2021/028-20-e/POR028-20-Report_Final.pdf

Financials & Budget

Funding Model

OSFI is funded mainly through assessments on the financial institutions and private pension plans that it regulates and a user-pay program for legislative approvals and other select services (~94% of revenues).

The amount charged to individual institutions is set out in regulations for our main activities:

• risk assessment and intervention (supervision);

• approvals and precedents; and

• regulation and guidance.

In general, OSFI’s system is designed to allocate costs based on the approximate amount of time spent supervising and regulating each industry. Costs are then assessed to individual institutions based on the applicable formula for the industry and the size of the institution. Staged institutions are assessed a surcharge on their base assessment, approximating the extra supervision resources required. As a result, well-managed, lower-risk institutions bear a smaller share of our costs.

We also receive revenues for cost-recovered services (~1% of revenues). These include revenues from provinces when we provide supervision services of their institutions on contract, federal Crown corporations such as the Canada Mortgage and Housing Corporation (CMHC), which we supervise under the National Housing Act, and revenues from other federal organizations to which we provide administrative services.

We collect administrative monetary penalties from financial institutions when they contravene a provision of a Financial Institutions Act and are charged in accordance with the Administrative Monetary Penalties (OSFI) Regulations. These penalties are collected and remitted to the consolidated revenue fund. By regulation, these funds cannot be used to reduce the overall assessment costs for the industry.

The Office of the Chief Actuary is funded (~5% of revenues) by fees charged for actuarial valuation and advisory services relating to the Canada Pension Plan, the Old Age Security program, the Canada Student Loans Program and various public sector pension and insurance plans, and by a parliamentary appropriation.

Note: Pursuant to section 17 of the OSFI Act, the Minister of Finance may spend any revenues collected under sections 23 and 23.1 of the OSFI Act (assessments) to defray the expenses associated with the operation of OSFI. The Act also establishes a ceiling for expenses at $40 million above the amount of revenue collected to be drawn from the Consolidated Revenue Fund of Canada.

Delegated Financial Authority

OSFI is subject to the TBS “Directive on Delegation of Spending and Financial Authorities,” which gives effect to sections 32, 33 and 34 of the Financial Administration Act (FAA). These sections set out the requirements for delegating financial authorities, and for an agency’s Chief Financial Officer—OSFI’s Managing Director, Finance and Corporate Planning—to establish and maintain internal controls for the expenditure process. OSFI’s financial authority is delegated to the Superintendent from the Minister of Finance, and the instrument facilitating this delegation is reviewed on an annual basis. Internal financial authorities are sub-delegated to the Office’s executive staff, in proportion to rank and responsibilities.

Budget & Forecast Cycles

OSFI reassesses its budget envelopes every fall to ensure they properly account for new priorities and initiatives. Final budget decisions are made by Executive Committee in mid/late December prior to the start of a new fiscal year. Budgets are set for the next four fiscal years, with a primary focus on the upcoming fiscal year.

As a practice of oversight of sectors’ performance against the approved annual budget, OSFI conducts full year forecasts reviews at Q1, Q2 and Q3. The scope of the forecast cycles is to identify any risks and opportunities in the current year forecast (vs. budget); and if necessary, reallocate funding. A financial forecasting accuracy measure, applicable to Sector heads, facilitates financial discipline. EC will review the next full year forecast (Q1 2021-22) in mid August.

External Financial Reporting

External Audit of Annual Financial Statements

OSFI’s financial statements are externally-audited on an annual basis; however, there is no legal requirement or Government policy that obliges the Office to do so. Of its own accord, OSFI began subjecting its annual financial statements to external audit in the late 1990s, conducted until 2012, by the Office of the Auditor General (OAG). Since 2012, OSFI has contracted with a private firm (currently Deloitte) to perform the audits, as the OAG’s statutory framework does not permit it to recover costs from OSFI. The decision to engage external auditors was due, in large part, to the importance of demonstrating consistency with the financial industry’s auditing standards.

Quarterly Financial Reporting

OSFI prepares quarterly financial statements, as required by section 65.1 of the FAA and in accordance with Public Sector Accounting Standards (PSAS), using the accrual basis of accounting. Prepared for the periods ending June 30, September 30 and December 31, presented to the Audit Committee and posted on OSFI’s external website within 60 days of quarter-end.

2021-22 to 2024-25 Financial Footprint

Upon request, OSFI's CFO Office can provide the 2021-22 to 2024-25 Financial Footprint. Subsequent Special EC meetings will provide details on budget envelopes and the current forecast cycle.

Other Reference Links