OSFI Presents Results of a Survey on Effectiveness of Bank Supervision
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
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Dieter Van der Stock
IFRS subject matter expert; LDTI subject matter expert; accounting authority; risk management specialist
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Related Articles
BIS Paper Studies Impact of Fintech Lending on Small Businesses in US
The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.
UK Regulators Issue CRR Changes and Stress Test Scenarios for Banks
The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).
EBA Launches EU-Wide Transparency Exercise in 2022
The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.
SRB on CRR Quick-Fix to Policy for Multiple Point of Entry Banks
The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."
EC Rule Lists Advanced Economies for Market Risk Capital Calculations
The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
