Office of the Superintendent of Financial Institutions
The Office of the Superintendent of Financial Institutions (OSFI) is an independent federal government agency that regulates and supervises more than 400 federally regulated financial institutions and 1,200 pension plans to determine whether they are in sound financial condition and meeting their requirements.
Federally regulated entities include all banks in Canada, and all federally incorporated or registered trust and loan companies, insurance companies, cooperative credit associations, fraternal benefit societies and private pension plans. OSFI’s scope of regulation does not include consumer or consumer-related issues or the securities sector, which are the responsibility of other agencies, both federal and provincial.
OSFI regulates by developing rules, interpreting legislation and regulations and providing regulatory approvals for certain types of transactions. It also contributes to new accounting, auditing and actuarial standards. All of this must balance the goals of safety and soundness with the need for institutions to operate within a competitive marketplace.
OSFI supervises by analyzing financial and economic trends to identify emerging issues that could adversely affect institutions. It assesses an institution’s financial condition, material risks and the quality of its governance, risk management and compliance. When weaknesses are identified, OSFI intervenes early and works with executive management, boards and pension plan administrators to correct matters.
Although OSFI plays an important oversight role, it does not manage the operations of institutions or pension plans. Their executive management, boards of directors and trustees are responsible for their success or failure. OSFI’s supervision approach is risk-based to reflect the nature, size, complexity and risk profile of an institution. Financial institutions must be allowed to take reasonable risks and compete effectively both at home and abroad, while at the same time safeguard 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 reports to Parliament through the minister of Finance. Various formal and informal processes are used to ensure effective execution of OSFI’s mandate. For example, the Financial Institutions Supervisory Committee, whose members are OSFI, the Department of Finance, the Bank of Canada, the Canada Deposit Insurance Corporation and the Financial Consumer Agency of Canada, meets at least quarterly to share information on matters relating to the supervision of federally regulated financial institutions.
OSFI also works with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), which is responsible for ensuring compliance with Canada’s Proceeds of Crime (money laundering) and Terrorist financing Act.
Collaboration and consultations with provincial counterparts and industry stakeholders in Canada and abroad are a regular occurrence and help OSFI to understand and resolve potential issues.
International organizations such as the Financial Stability Board, the Basel Committee on Banking Supervision, and the International Association of Insurance Supervisors play a key role in the development of regulatory frameworks for banks and insurers that contribute to a strong and stable global financial system. OSFI has earned a strong international reputation through its active participation in such international organizations, which allow it to share Canadian perspectives and help shape international rule setting.
A properly functioning, efficient financial system in which Canadians can place their trust and confidence is essential to Canada’s economy. OSFI’s regulation and supervision activities play a key role in contributing to public confidence in the Canadian financial system.
And OSFI doesn’t cost Canadian taxpayers any money. OSFI is funded from fees charged to regulated entities.
The Office of the Chief Actuary is an independent unit housed within OSFI that provides a range of actuarial valuation and advisory services to the federal government. This includes actuarial reports on the Canada Pension Plan (CPP), Old Age Security Program and the Canada Student Loans Program. Although the Chief Actuary reports to the Superintendent, he or she is solely responsible for the content and actuarial opinions in the reports.