Featured Product

    OSFI Presents Results of a Survey on Effectiveness of Bank Supervision

    November 20, 2019

    OSFI published the findings of a confidential consultation with the Chief Executive Officers, Chief Financial Officers, and other senior executives of deposit-taking institutions, with the intention to monitor the effectiveness of OSFI in discharging the key elements of its mandate. OSFI had commissioned Sage Research Corporation, an independent research firm, to conduct this consultation. The results reveal that OSFI is effective in ensuring soundness of the deposit-taking sector in Canada, though participants expressed concerns and highlighted the need for certain improvements. The concerns mainly relate to the early adoption of certain international banking standards, the OSFI approach to proportionality, and the issues with regard to implementation of IFRS 9.

    The primary purpose of the research was to explore perceptions of the OSFI as the regulator and supervisor of federally regulated deposit-taking institutions. The objectives of the research included assessment of the OSFI guidance to the industry, its supervisory activities, and its approvals process for regulatory approval applications. The consultation comprised a series of confidential interviews with executives representing a cross-section of the deposit-taking institutions regulated by OSFI. Although OSFI is perceived to be effective in the overall discharge of its mandate, the study did reveal some areas for improvement. OSFI appreciates the feedback provided through this consultation and has developed action plans to address areas identified for improvement. The key findings included the following:

    • In addition to prioritizing the cyber or emerging technologies and the unregulated financial sector, the more common suggestions included continued focus on enhancing the consideration of deposit-taking financial institutions' nature, size, complexity, and risk profile in guidance and supervision and more consideration to the negative impact of early adoption of international standards, particularly on competitiveness.
    • Concerns have been expressed with respect to early adoption of standards that can adversely affect international competitiveness. Going forward, concern was about the early adoption of the Basel III output floor standard, the Fundamental Review of the Trading Book (FRTB), and the Standardized Approach for Measuring Counterparty Credit Risk (SA-CCR). Some said guidance, particularly related to liquidity requirements, sometimes favors domestic systemically important banks (D-SIBs), making it difficult for smaller institutions to compete.
    • Some deposit-taking institutions that offer specialized or non-traditional services said OSFI does not sufficiently adjust supervision to their business model or take into account the lower risk profile of their type of business.
    • Reporting and compliance requirements are perceived by some to be onerous and disproportionate given the risk profiles and the limited resources at smaller deposit-taking institutions.
    • Some D-SIBs used this discussion to voice concerns about the implementation of IFRS 9 on financial instruments. Some believed that OSFI gave different direction to different D-SIBs, resulting in differences in implementation and outcomes. A few attributed this in part to inadequate IFRS 9 subject-matter expertise at OSFI. 
    • A few expressed a concern that given the different outputs resulting from variability in models and processes across D-SIBs, OSFI will now, after the fact, try to enforce uniformity among the D-SIBs without consideration of the nuances of the operations and approaches of the different D-SIBs.

     

    Related Links

    Keywords: Americas, Canada, Banking, SA-CCR, IFRS 9, Basel III, D-SIBs, Liquidity Requirements, OSFI

    Featured Experts
    Related Articles
    News

    HKMA Finalizes Policy Modules on Group-Wide Approach and Remuneration

    The Hong Kong Monetary Authority (HKMA) revised the Supervisory Policy Manual module CG-5 that sets out guidelines on a sound remuneration system for authorized institutions.

    July 29, 2021 WebPage Regulatory News
    News

    EBA Guide to Monitor Threshold for Intermediate Parent Undertakings

    The European Banking Authority (EBA) published the final guidelines on the monitoring of the threshold and other procedural aspects on the establishment of intermediate parent undertakings in European Union (EU), as laid down in the Capital Requirements Directive (CRD).

    July 28, 2021 WebPage Regulatory News
    News

    PRA Finalizes Approach to Supervision of International Banks

    In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.

    July 26, 2021 WebPage Regulatory News
    News

    FCA Issues PS21/9 on Implementation of Investment Firms Regime

    The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.

    July 26, 2021 WebPage Regulatory News
    News

    EBA Proposes Regulatory Standards to Identify Shadow Banking Entities

    The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.

    July 26, 2021 WebPage Regulatory News
    News

    IOSCO Proposes Recommendations on ESG Ratings and Data Providers

    The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.

    July 26, 2021 WebPage Regulatory News
    News

    ESMA Group Issues Recommendations on RFR Switch in Interdealer Market

    The European Securities and Markets Authority (ESMA) published recommendations from the Working Group on Euro Risk-Free Rates (RFR) on the switch to risk-free rates in the interdealer market.

    July 26, 2021 WebPage Regulatory News
    News

    ECB Study Assesses Impact of Basel III Finalization Package

    The European Central Bank (ECB) published a paper as well as an article in the July Macroprudential Bulletin, both of which offer insights on the assessment of the impact of Basel III finalization package on the euro area.

    July 26, 2021 WebPage Regulatory News
    News

    ISDA Finds FRTB Results in Higher Capital Charges for Carbon Trading

    The International Swaps and Derivatives Association (ISDA) published a paper that explores the impact of the Fundamental Review of the Trading Book (FRTB) on the trading of carbon certificates.

    July 26, 2021 WebPage Regulatory News
    News

    PRA Updates Remuneration Policy Statement Templates and Tables

    The Prudential Regulation Authority (PRA) published the remuneration policy self-assessment templates and tables on strengthening accountability.

    July 26, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7307