E-20 - CDOR Benchmark-Setting Submissions - Guideline (2014)
The Canadian Dollar Offered Rate (CDOR) is a key financial benchmark in Canada that is calculated on the basis of interest rates submitted by a group of major Canadian banks. The Canadian Heads of Regulatory Agencies (HoA)
Since the global financial crisis, OSFI has increasingly worked with banks to enhance corporate governance and risk management domestically to meet new international standards. Consistent with this work, this Guideline sets out OSFI’s expectations for CDOR submitting banks in respect of the governance and internal controls surrounding the activities and processes of their rate submissions.
In respect of CDOR benchmark-setting submissions, Senior Management
Please refer to OSFI’s Corporate Governance Guideline for OSFI’s expectations of submitting banks’ Boards of Directors in regards to operational, business, risk and crisis management policies.
III. Internal Controls
OSFI expects oversight functions that are independent of operational management to control a submitting bank’s CDOR submission process.
Prompt action should be taken to correct any material internal control deficiencies or breaches in regard to the submission process, and there should be processes in place to monitor and report on the progress made to correct such deficiencies.
Internal controls and procedures covering the CDOR submission process, including submission methodology, should be clearly documented, reviewed at least annually, and updated as necessary. In addition, a bank’s CDOR submission performance should be discussed regularly with relevant internal stakeholders, including the business units involved in the submission process.
Submitting banks should establish and provide training on a clear and effective conflict of interest policy that applies to all employees involved in submission activities. The conflict of interest policy should include protocols for internal and external communications related to rate submissions.
IV. Internal Audit
Submitting banks are expected to include in their annual audit plans sufficient work to provide independent assurances to Senior Management and the Board on the quality and effectiveness of the bank’s internal control, risk management, and governance systems and processes regarding the CDOR submission processes and compliance with the expectations in the Guideline.
V. Supervisory Assessments
As part of OSFI’s risk-based supervisory framework, a submitting bank’s oversight and controls for the CDOR submission process will be evaluated against the expectations contained in this Guideline. In this regard, OSFI may request that the submitting banks share copies of reports concerning the CDOR submission process. OSFI may also discuss findings directly with the bank’s Senior Management, the Board of Directors, and the oversight functions.