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
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BaFin Consults on Resolvability Requirements for Resolution Planning
The Federal Financial Supervisory Authority of Germany (BaFin) proposed to amend the “Capital Investment Conduct And Organization Ordinance” and issued a draft circular on the minimum resolvability requirements for resolution planning.
EBA Consults on Certain Standards and Guidelines Under CRR and BRRD
The European Banking Authority (EBA) proposed guidelines, for the resolution authorities, on the publication of the write-down and conversion and bail-in exchange mechanic, with the comment period ending on September 07, 2022.
OJK Publishes Regulatory Updates for Financial Sector Entities
The Financial Services Authority of Indonesia (OJK) is strengthening cooperation with the Australian Prudential Regulation Authority (APRA) and the Japanese Financial Services Agency (JFSA)
EU Publishes Rules on DLT and Data Governance
The European Parliament and the Council published Regulation 2022/868 on European data governance (Data Governance Act).
EBA Publishes Phase 2 of Reporting Framework 3.2
The European Banking Authority (EBA) published phase 2 of its reporting framework 3.2. The technical package supports the implementation of the updated reporting framework by providing standard specifications