OSFI's supervisory intervention approach

This video examines OSFI’s intervention process for federally regulated financial institutions when weaknesses in their financial conditions are found.

Video duration: 00 hours:04 minutes:18 seconds
Date: July 19, 2021



OSFI’s Supervisory Intervention Approach


[Animated video explaining OSFI's supervisory intervention approach]

Narrator: The Office of the Superintendent of Financial Institutions, or OSFI, is an independent federal government agency that regulates and supervises Canadian banks, insurance companies and private pension plans to determine whether they are in good financial condition.

Canada's banking and financial systems are among the strongest and safest in the world.

One of the reasons for this is OSFI's early supervisory intervention approach.

Our supervisors regularly examine financial institutions and pension plans, focusing on their financial condition, risk management and controls, and governance.

When we find weaknesses, we ensure the institution or plan administrator addresses these issues in a timely manner.

Issues can become more noticeable during times of economic stress.

Let's take a closer look at the intervention process for federal financial institutions.

It's important to know that the intervention process is a flexible one because each case is unique.

[Text on screen: Intervention process]

Narrator: OSFI has published intervention guides that explain the four stages of intervention: early warning, moderate alert, high alert and situation critical.

[Text on screen: Intervention guides: Early warning; Moderate alert: Risk to financial viability or solvency; High alert: Future financial viability in serious doubt; Situation critical: Non-viability / Insolvency imminent]

Narrator: The guides explain the tools our teams can use at each stage, and when specific actions typically happen.

Throughout the process, we keep all information confidential so we do not undermine public confidence in an institution.

We always want to improve the safety and soundness of an institution, because this protects the best interests of depositors, policyholders and other creditors.

[Text on screen: Intervention process: Stage 1 – Early warning]

Narrator: Let's examine the four stages of the intervention process more closely, beginning with Stage 1, the early warning stage.

We put an institution in Stage 1 when we find problems that are significant, but do not yet make us concerned about its safety and soundness.

It is still important to quickly address weaknesses to prevent further deterioration.

Examples of our Stage 1 activities include issuing a letter with a list of problems to address, requiring an institution to provide a plan on how to address the problems, and following up frequently to make sure it is responding effectively.

[Text on screen: Intervention process: Stage 2 – Moderate alert]

Narrator: Moving an institution to Stage 2, or Moderate Alert, means we have concerns about its safety and soundness.

While there are no immediate threats to its financial viability, it is vulnerable to negative business and economic conditions.

Examples of our Stage 2 activities include increasing capital and liquidity requirements, and imposing business restrictions, such as limiting how much an institution can grow and the types and amount of business it can conduct.

[Text on screen: Intervention process: Stage 3 – Hight alert]

Narrator: Moving an institution to Stage 3, or High Alert, means it has severe safety and soundness issues and is in danger of failing unless the problems are promptly addressed.

Examples of our Stage 3 activities include embedding OSFI staff in the institution's operations and tightening business restrictions.

[Text on screen: Intervention process: Stage 4 – Situation critical]

Narrator: At Stage 4, or Situation Critical, OSFI staff have determined the institution is experiencing very severe financial difficulties and is on the brink of non-viability.

At this point, our focus shifts from preventing failure to working closely with our partners to determine the appropriate strategies and solutions that best protect the interests of depositors, policyholders and creditors.

[Text on screen: Bank of Canada, Department of Finance, Financial Consumer Agency of Canada, Canada Deposit Insurance Corporation, Assuris, PACICC (Property and Casualty Insurance Compensation Corporation)]

Narrator: Fortunately, Canadian financial institutions rarely reach this point. But if one does, Canadians can count on OSFI's timely intervention action to protect the interests of depositors, policyholders and creditors.

[Visual identifier: OSFI logo]

Narrator: For more information, visit the OSFI website at www.osfi-bsif.gc.ca, and stay connected with us on Twitter and LinkedIn.

[Visual identifier: Government of Canada logo]