Office of the Superintendent of Financial Institutions
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Appropriate Minister: Joe Oliver
Institutional Head: Jeremy Rudin
Ministerial Portfolio: Finance
Enabling Instrument(s): Office of the Superintendent of Financial Institutions Act (OSFI Act)
Year of Incorporation / Commencement: 1987
OSFI was established in 1987 by an Act of Parliament: the Office of the Superintendent of Financial Institutions Act (OSFI Act). OSFI supervises and regulates 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. Under the OSFI Act, the Superintendent is solely responsible for exercising OSFI’s authorities and is required to report to the Minister of Finance from time to time on the administration of the financial institutions legislation.
OSFI’s mandate is to:
From its mandate, OSFI has identified two strategic outcomes:
1. A safe and sound Canadian financial system
2. A financially sound and sustainable Canadian public retirement income system
OSFI’s legislation acknowledges the need to allow institutions to compete effectively and take reasonable risks. It also recognizes that management, boards of directors and plan administrators are ultimately responsible and that financial institutions and pension plans can fail.
OSFI works with a number of key partners on the Financial Institutions Supervisory Committee (FISC), which the Superintendent chairs, including the Department of Finance, the Bank of Canada, Canada Deposit Insurance Corporation and the Financial Consumer Agency of Canada. Together, these organizations constitute Canada’s network of financial regulation and supervision, and provide a system of depositor and policyholder protection.
The Office of the Chief Actuary (OCA), which is an independent unit within OSFI, provides actuarial valuation and advisory services to the Government of Canada in the form of reports tabled in Parliament. While the Chief Actuary reports to the Superintendent, he is solely responsible for the content and actuarial opinions in reports prepared by the OCA. He is also solely responsible for the actuarial advice provided by the OCA to the relevant government departments, including the executive arm of provincial and territorial governments, which are co-stewards of the Canada Pension Plan (CPP).
In 2014-15, the following steps were undertaken and successfully contributed to fostering a safe and sound Canadian financial system through the provision of guidance and strong oversight in targeted areas and by drawing from results of international financial sector reviews.
In 2014-15, the following steps were undertaken and successfully contributed to fostering a safe and sound Canadian financial system through OSFI’s continuing work towards enhancing its processes for supervisory activities.
In 2014-15, the following steps were undertaken and successfully contributed to fostering a safe and sound Canadian financial system as well as a financially sound and sustainable Canadian public retirement income system through the provision of guidance and by drawing from and contributing to international financial sector forums.
In 2014-15, the following steps were undertaken and successfully contributed to fostering a safe and sound Canadian financial system as well as a financially sound and sustainable Canadian public retirement income system by helping to ensure that OSFI has the capacity and expertise it needs to deliver on business objectives.
In 2014-15, the following steps were undertaken and successfully contributed to fostering a safe and sound Canadian financial system as well as a financially sound and sustainable Canadian public retirement income system by helping to ensure that OSFI has the information, tools and systems it needs to deliver on business objectives.
The environment within which OSFI operates is constantly evolving and becoming more complex. Uncertain economic and financial conditions create challenges for financial institutions and pension plan sponsors. OSFI's ability to achieve its mandate and objectives is impacted by the range of risks that exist in such circumstances.
While this section focuses on external risks, OSFI has also dedicated significant efforts to managing internal risks related to its human resources, systems and processes. This is noteworthy given the important role that OSFI staff and supporting operations play in responding to changes in the business environment.
OSFI priorities are informed by risks identified through the enterprise-wide risk management process. As a result, there is a strong alignment between the risk response strategies noted in the following table and the steps taken under the first two Priorities as described in the previous section on Organizational Priorities.
In 2014-15, OSFI paid particular attention to three risk areas that are detailed below.
Economic, Industry and Regulatory Environment:
risk pertaining to the ability of FRFIs and pension plans to cope with the slow economic growth accompanied by exceptionally low interest rates and rising household indebtedness.
The risk also links to:
• strategies and business models adopted by FRFIs and pension plans to address potential threats in such an environment; and,
• OSFI’s ability to foster resilience by positively influencing regulatory changes in the financial sector and through the design and application of its supervisory framework.
The risk response strategy continued to be effective in identifying areas where financial institutions and pension plans were exposed to risk, and allowed for early intervention actions.
Also refer to performance information presented under Programs 1.1 and 1.2.
Strategic Outcome One:A safe and sound Canadian financial system.
Program 1.1: Regulation and Supervision of Federally Regulated Financial Institutions
Program 1.2: Regulation and Supervision of Federally Regulated Private Pension Plans
The risk response strategy continued to contribute to the effective mitigation of the risk given that it supported strengthening the frameworks for capital, leverage and liquidity consistent with international developments that, in turn, promote a more resilient global financial sector.
Also refer to performance information presented under the Program 1.1.
Changes to International Financial Reporting Standards (IFRS) and Auditing Standards: changes in standards will affect accounting, loan values and provisions, actuarial standards, and the regulatory capital regime.
The risk relates to OSFI’s ability to perform accurate risk assessments of financial institutions and to adjust the regulatory capital framework.
The risk response strategy continued to effectively ensure that OSFI’s prudential views were communicated and understood. It also ensured that financial institutions were aware of OSFI expectations regarding the adoption of amended accounting standards.
Also refer to performance information presented under the Program 1.1.
During 2014-15, equity market volatility, elevated domestic household indebtedness, exceptionally low interest rates, and falling oil prices continued to be seen as sources of potential systemic vulnerability. While financial institutions’ performance during this period was stable or improved slightly from the previous year, OSFI continued to monitor the global economy and assess the potential impact of various events on the risk profiles of FRFIs.
Federally regulated private pension plans experienced a more challenging period in 2014-15 compared to the previous year, primarily due to further declines in long-term interest rates. While this resulted in a slight deterioration in solvency positions for defined benefit pension plans, the impact on required solvency funding payments is expected to be moderated given that federal solvency funding requirements are based on a pension plan’s average solvency position over the past three years. For federally regulated defined benefit pension plans as a whole, the three-year average solvency ratio for the period ending December 2014 is slightly higher than it was for the period ending December 2013.
Throughout 2014-15, OSFI undertook a number of actions to strengthen its approach to financial regulation and supervision. OSFI continued to work with various federal government organizations to review developments in the financial system as well as to discuss and coordinate approaches to overseeing the financial sector. OSFI also engaged with international partners in an ongoing effort to strengthen global regulation and supervision frameworks. These collaborative efforts continue to support the sound management of risks within OSFI’s environment which, in turn, promotes confidence in the financial system.
Budgetary Financial Resources (dollars)
Human Resources (Full-Time Equivalents [FTEs])
Budgetary Performance Summary for Strategic Outcome(s) and Program(s) (dollars)
Regulation and Supervision of Federally Regulated Financial Institutions
Total actual spending in 2014-15 increased by 13.7% from 2012-13. During this period, resources were added to the Regulation and Supervision of Federally Regulated Financial Institutions program to address OSFI’s expanded mandate to include the oversight of Canada Mortgage and Housing Corporation’s (CMHC) commercial activities, increased work related to credit risk, a revised approach to assessing operational risk, and new work related to corporate governance. Spending in 2014-15 also included a one-time payment related to the Government of Canada’s (GoC) move to an employee compensation model of “pay in arrears”.
Spending in Internal Services decreased by 12.3% in 2014-15 from 2013-14 due to the completion of OSFI’s five-year Information Technology Renewal (ITR) program and the return to normal levels of investments in IM/IT to upgrade systems and renew core infrastructure and applications. The increase of 24.5% in planned spending in 2016-17 is in part due to relocation costs that had been planned for the Toronto office. At the time of writing, however, indications from Public Works and Government Services Canada suggest that the office will likely remain in its existing space. A reduction in OSFI’s 2016-17 planned spending as a result of avoiding a relocation will be reflected in the 2016-17 Report on Plans and Priorities.
Spending within the Regulation and Supervision of Federally Regulated Private Pension Plans program has decreased every year since 2012-13, when the development of a new system to enhance pension plan supervision was completed. Spending in 2014-15 was 9.2% lower than the previous year due to vacancies and non-recurring legal fees incurred in 2013-14.
Spending in the Actuarial Valuation and Advisory Services program decreased by 2.3% in 2014-15 compared to prior year due to the triennial Canada Pension Plan peer review that occurred in 2013-14. Planned spending in 2015-16 onward is expected to increase due to staffing of vacant positions and new resources to address incremental work related to actuarial valuations.
Total actual spending in 2014-15 was 2.5% higher than planned, largely due to the one-time payment related to the GoC’s move to pay in arrears, the revised timelines to complete certain projects within OSFI’s ITR program, and an increase in FTEs in the Regulation and Supervision of Federally Regulated Financial Institutions program for the reasons noted above.
Alignment of 2014-15 Actual Spending With the Whole-of-Government Framework (dollars)
Total Spending by Spending Area (dollars)
The 2013-14 fiscal year saw a growth in expenditures of 17.2%. This was primarily due to the payouts related to the curtailment of severance for unionized employees, the full-year impact of employees hired during 2012-13, normal inflation and merit adjustments, investments in OSFI’s ITR initiative, and the settlement of a pay equity claim dating from 1987 to 1997 that was previously provisioned for but paid out in 2013-14.
OSFI’s 2014-15 expenditures decreased by 3.0%, largely due to the non-recurring costs in 2013-14 related to the aforementioned curtailment of severance and settlement of the pay equity claim.
OSFI’s overall spending is expected to be relatively stable in 2015-16, increasing primarily by normal merit and inflationary adjustments. Expenditures in 2016-17 are planned to increase by 10.4% due to the Toronto office relocation costs. However, as noted in the Budget Performance Summary section, a reduction in OSFI’s 2016-17 planned spending as a result of avoiding a relocation will be reflected in its 2016-17 Report on Plans and Priorities.
Over the planning years, OSFI’s staff complement is expected to remain relatively stable.
For information on OSFI’s organizational voted and statutory expenditures, consult the Public Accounts of Canada 2015, which is available on the Public Works and Government Services Canada website.
Type is defined as follows: previously committed to—committed to in the first or second fiscal year prior to the subject year of the report; ongoing—committed to at least three fiscal years prior to the subject year of the report; and new—newly committed to in the reporting year of the Report on Plans and Priorities or the Departmental Performance Report.
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Represents actual in-year authorities available for use, and does not include an administrative carry-forward that appears on OSFI’s public accounts.
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The majority of OSFI’s expenditures are recovered via respendable revenue. In order to provide an accurate representation of OSFI’s spending, amounts shown reflect gross expenditures.
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