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Superintendent’s Message
Although Canadian financial institutions remained well capitalized and competitive internationally in 2010-2011, the global economic and regulatory climate remained unsettled. In response to the global financial crisis, international regulatory bodies have proposed a number of regulatory changes that are
likely to have a transformational impact on the global financial system. While Canadian financial institutions are in an enviable position to adapt to and implement these changes, the global recovery is fragile and asymmetric. It is important that OSFI and the institutions it oversees guard against complacency and the notion that we can return to “business as usual” without taking
stock of the lessons learned from the crisis.
Our continuing participation internationally -- to work on and implement Canada’s G-20 commitments -- allows us to contribute to improving global standards, while securing modifications that reflect the Canadian regulatory experience and that of Canadian financial institutions.
We continued to work closely with our federal financial regulatory partners (Bank of Canada, Department of Finance, Canada Deposit Insurance Corporation, and Financial Consumer Agency of Canada) to discuss the health of financial institutions, monitor the resilience of the financial sector, and discuss macro-economic and systemic risk issues.
We worked on implementing changes to the Pension Benefits Standards Act and continued to review and update other previously published policy advisories, guidance and directives to ensure that we maintain a modern, flexible and effective federal regulatory framework.
We continued to promote a balanced approach to new regulation, and also promoted as much focus on day-to-day supervision of institutions as on regulatory changes. To promote best practice in the industry, we planned and conducted comparative reviews on corporate governance, stress testing, commodities, and information security. We hosted annual risk management seminars for deposit-taking institutions, and the life insurance and property and casualty insurance industries. We updated our Supervisory Framework to reflect changing risks in the financial environment, and completed our internally focused, multi-year project to move to International Financial Reporting Standards (IFRS) on time and on budget.
All of these accomplishments result from the contributions of our employees and their commitment to meeting our mandate. Their professional expertise and judgement derived from experience are responsible for the strong and effective regulation and supervision that Canadian depositors, policy holder and beneficiaries rely on.
It will take some time before the impacts of the financial crisis are behind us. Implementation of regulatory responses, both internationally and domestically, will take time as well, and require us to watch out for unintended consequences. Acting prudently has been a source of stability for the Canadian financial system and is the foundation for continued success.
SECTION I: DEPARTMENTAL OVERVIEW
Raison d’être
The Office of the Superintendent of Financial Institutions (OSFI) supervises and regulates all federally incorporated or registered deposit-taking institutions (e.g., banks), life insurance companies, property and casualty insurance companies, and federally regulated private pension plans.
OSFI safeguards depositors, policyholders and private pension plan members by enhancing the safety and soundness of federally regulated financial institutions and private pension plans.
The Office of the Chief Actuary (OCA) is a separate unit within OSFI and provides expert actuarial services and advice on the state of various public pension plans and on the financial implications of options being considered by policy makers. In conducting its work, the OCA plays a vital and independent role towards a financially sound and sustainable Canadian public retirement income system.
Responsibilities
OSFI's legislated mandate was implemented in 1996 and under the legislation, OSFI’s mandate is to:
- Supervise federally regulated financial institutions and private pension plans to determine whether they are in sound financial condition and meeting minimum plan funding requirements, respectively, and are complying with their governing law and supervisory requirements;
- Promptly advise institutions and plans in the event there are material deficiencies and take, or require management, boards or plan administrators to take, necessary corrective measures expeditiously;
- Advance and administer a regulatory framework that promotes the adoption of policies and procedures designed to control and manage risk; and
- Monitor and evaluate system-wide or sectoral issues that may impact institutions negatively.
OSFI’s prudential mandate supports a safe and sound Canadian financial system.
OSFI’s legislation also acknowledges the need to allow institutions to compete effectively and take reasonable risks. It recognizes that management, boards of directors, and plan administrators are ultimately responsible and that financial institutions and pension plans can fail.
Strategic Outcomes and Program Activity Architecture (PAA)
Primary to OSFI’s mandate and central to its contribution to Canada’s financial system are two strategic outcomes:
- A safe and sound Canadian financial system.
- A financially sound and sustainable Canadian public retirement income system.
The chart below illustrates OSFI’s framework of program activities and program sub-activities, which roll-up and contribute to progress toward the strategic outcomes.
Organizational Priorities
The following tables present a summary of achievements against OSFI’s operational and managerial priorities in 2010-2011.
Priority Status Legend
Exceeded: More than 100 per cent of the expected level of performance (as evidenced by the indicator and target or planned activities and outputs) for the expected result or priority identified in the corresponding Report on Plans and Priorities (RPP) was achieved during the fiscal year.
Met all: 100 per cent of the expected level of performance (as evidenced by the indicator and target or planned activities and expected outputs) for the expected result or priority identified in the corresponding RPP was achieved during the fiscal year.
Mostly met: 80 to 99 per cent of the expected level of performance (as evidenced by the indicator and target or planned activities and expected outputs) for the expected result or priority identified in the corresponding RPP was achieved during the fiscal year.
Somewhat met: 60 to 79 per cent of the expected level of performance (as evidenced by the indicator and target or planned activities and outputs) for the expected result or priority identified in the corresponding RPP was achieved during the fiscal year.
Not met: Less than 60 per cent of the expected level of performance (as evidenced by the indicator and target or planned activities and outputs) for the expected result or priority identified in the corresponding RPP was achieved during the fiscal year.
| Priority | Type1 | Strategic Outcome(s) and/or Program Activity(ies) |
|---|---|---|
| Enhanced Identification of Emerging Risks | Previously committed to | Strategic Outcome One |
| Status: Met All | ||
|
Continue to improve OSFI’s ability to identify, monitor and report on emerging risks to federally regulated financial institutions and private pension plans, including system-wide risks, through enhanced research and intelligence gathering, international and domestic monitoring, and comparative reviews in key risk areas.
|
||
1 Type is defined as follows: Previously committed to—committed to in the first or second fiscal year before the subject year of the report; Ongoing—committed to at least three fiscal years before the subject year of the report; and New—newly committed to in the reporting year of the DPR.
2 Commodity trading is part of FRFIs’ trading book activities that OSFI supervises. In addition, commodity risk factor Value at Risk (VaR) forms part of various FRFIs’ VaR models OSFI approves for the calculation of regulatory market risk capital. (VaR is a statistical technique that measures the worst-case loss expected over a one-day period within a 99% confidence level.)
| Priority | Type | Strategic Outcome(s) and/or Program Activity(ies) |
|---|---|---|
| Institutional and Market Resilience | Previously committed to | Strategic Outcome One |
| Status: Met All | ||
|
Continue to participate in international discussions of key issues arising from global financial events, and work with Financial Institutions Supervisory Committee (FISC) partners and OSFI-regulated industries to maintain strong communications, preparedness and overall market resilience.
|
||
| Priority | Type | Strategic Outcome(s) and/or Program Activity(ies) |
|---|---|---|
| Capital Adequacy | Previously committed to | Strategic Outcome One |
| Status: Met All | ||
|
Continue to participate actively in international forums (Basel Committee on Banking Supervision, Financial Stability Board, Joint Forum, and International Association of Insurance Supervisors) to contribute to the development of internationally agreed upon bank and insurance capital standards; review and improve domestic regulatory capital requirements and assessment practices; and enhance risk sensitivity of capital requirements in the insurance and banking sectors.
|
||
| Priority | Type | Strategic Outcome(s) and/or Program Activity(ies) |
|---|---|---|
| People | Ongoing | Strategic Outcomes One and Two |
| Status: Met All | ||
|
Identify changing human resources requirements to ensure timely availability of qualified staff and the assignment of these resources based on identified risks and priority areas; implement strategic learning and development (training) plans.
|
||
| Priority | Type | Strategic Outcome(s) and/or Program Activity(ies) |
|---|---|---|
| Infrastructure Enhancements | Previously committed to | Strategic Outcome One |
| Status: Met All | ||
|
Implement the long-term strategies and related governance for Information Management and Information Technology (IM/IT) necessary to support our evolving supervisory and regulatory activities.
|
||
| Priority | Type | Strategic Outcome(s) and/or Program Activity(ies) |
|---|---|---|
| Changes to International Financial Reporting Standards (IFRS) | Previously committed to | Strategic Outcome One |
| Status: Met All | ||
|
Implement the move to International Financial Reporting Standards (IFRS) in 2011, by assessing the impact on federally regulated financial institutions and pension plans, in order to address its implications for OSFI’s prudential regime and regulatory policies.
|
||
Risk Analysis
Enterprise-Wide Risk Management
The environment within which OSFI operates presents an array of challenges to the achievement of its mandate and objectives. While many of these challenges are consistently present, the extent to which they present a risk to OSFI’s objectives varies, depending on economic and financial conditions and the financial industry environment. OSFI’s ability to achieve its mandate depends on the timeliness and effectiveness with which it identifies, evaluates, prioritizes, and develops initiatives to address areas where its exposure is greatest.
OSFI’s Enterprise Risk Management (ERM) framework divides risks into external and internal categories. The external risk category consists of economic and financial conditions, the financial industry’s environment, OSFI’s legal environment and catastrophic events. External risks arise from events that OSFI can potentially influence but cannot control, but must be able to monitor and react to in order to mitigate the impact. The internal risk category consists of risks within OSFI’s control that can broadly be categorized as people, processes, systems and culture.
External Risks
Economic, Industry and Regulatory Environment
The Canadian economy continues to recover after a sharp contraction in economic activity that began in the middle of 2008. Indeed, the economic recovery in Canada became more firmly entrenched in 2010, with aggregate output surpassing its pre-recession level, while inflation averaged around 2 per cent during that year. The resumption of growth since the second half of 2009 has been supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, stronger business and consumer confidence, and recovery in Canada's major trading partners.
Looking ahead, key sources of risk to the strength and stability of the Canadian financial system include the following:
- Some Canadian households may not be able to service their debt obligations in an environment of (eventually) rising interest rates.
- Economic growth is likely to remain moderate for some time, and there remains uncertainty about how long it will take for a return to self-sustaining growth in private demand particularly in the United States -- a key influence on the Canadian economy and financial system.3
- Further, the effectiveness with which the U.S. government addresses its unsustainable fiscal deficit and debt is important to the sustainability of the American recovery, the smooth functioning of global financial markets, and therefore the well-being of the Canadian economy.
3 Private demand includes consumption/investment/net-exports expenditure (e.g., spending/purchases) and excludes government expenditure.
Other considerations are the following.
- There is a growing conviction that at least one of the smaller periphery European economies will need to restructure its debt, which may raise questions about the sustainability of other such countries' debt burdens. The key dynamic associated with Euro sovereign risk is the incidence of the burden of the debt overhang to: the citizens of the indebted periphery countries; citizens of the core Euro countries through transfers; and creditor banks through debt restructuring. This adjustment process could unsettle global financial markets, if, for example, such events led market participants to liquidate assets to meet funding requirements, margin calls, and other related contingencies.
- Continuing adjustments in global exchange rates are necessary to address global imbalances (i.e., large and unsustainable current account imbalances) over time, and this could be associated with volatility in these (and related) markets.
Global financial events require that OSFI, like all financial sector regulators and supervisors, must be in a position to respond effectively to a constantly evolving economic and regulatory environment. On a micro-level, prevailing conditions continue to put pressure on the Capital and Accounting Policy Divisions to provide interpretations or to reassess existing guidance to ensure its effectiveness under stressful and evolving conditions. Specific strategies have been put in place within individual Divisions, consistent with specialized responsibilities and current projects, to address ongoing industry developments. Resources continue to be reassigned and priorities realigned as necessary. Further, OSFI continues to monitor and analyze emerging risks both at the institution and system-wide levels.
Capital Adequacy
OSFI continued its assessment and update of the Minimum Continuing Capital and Surplus Requirements (MCCSR) and the Minimum Capital Test (MCT) to reflect lessons learned from the last financial turmoil and to take account of the direction of international efforts such as those of the International Association of Insurance Supervisors (IAIS) to develop new capital guidance. As a first step, changes to the treatment of segregated funds were introduced in late 2010 to ensure the risks of such products are better assessed and better capitalized. The development of the standardized approach also progressed as OSFI conducted quantitative impact studies on market and interest risk. As Canada has been at the forefront of insurance regulation, adjustments to the MCCSR and the MCT are necessary to ensure that Canada’s capital rules remain effective and among the international leaders in this field. In 2010-2011, OSFI continued to participate in a number of IAIS initiatives including the development of a Common Assessment Framework for internationally active insurance groups.
Initiatives mandated by the G-20 and the Financial Stability Board, coupled with the market events of 2008-2009, have required more focus on the measurement of risks and their relation to the overall level of capital adequacy. As a result, the Basel Committee on Banking Supervision introduced the so-called Basel III rules text in December of 2010 to strengthen the resilience of the global banking system to future stress. The Basel III rules feature a combination of measures such as introducing standards for liquidity buffers that can be drawn down in periods of stress, strengthening the quality of bank capital, improving the risk coverage of the capital framework and introducing a non-risk based supplementary measure. During 2010-2011, OSFI worked activelywith BCBS regulators and Canadian banks to assess the combined impact of the BCBS proposals and to adjust the initial proposals where necessary to produce the rules text issued in December 2010. As well, OSFI engaged in international dialogues on the merits of Financial Stability Board sponsored initiatives for the use of capital buffers to protect the banking sector from periods of excessive credit growth that are associated with system-wide risk, and participated in the development of such measures. OSFI has worked closely with the Bank of Canada and Department of Finance on these developments to facilitate coordination of their efforts at maintaining the elements of the Canadian system that proved a strength during the financial crisis.
Pension Environment
Despite the broad economic recovery that took hold in 2010, some pension plans continue to face funding challenges. While pension plan investments earned generally strong returns in 2010, investment gains were partially offset by the impact of lower long-term interest rates on pension plan liabilities.
To address the risks, OSFI is devoting resources to regulatory and guidance initiatives; is monitoring federally regulated pension plans closely; conducts estimated solvency ratio and other ad-hoc scenario testing; and continues to emphasize the importance of stress testing and funding policy statements for defined benefit pension plans.
Internal Risks
People
OSFI’s success is dependent upon having employees with highly specialized knowledge, skills and experience to regulate and supervise financial institutions, identify significant issues, and perform accurate risk assessments. OSFI’s capacity to carry out its plans is challenged as it is being called on to take an increasing leadership role domestically and internationally.
A volatile global economy, increasingly complex products, changes to prudential regulation and emerging risks in the industry also mean that OSFI needs to be able to attract, motivate, develop and retain skilled people, particularly those whose skills are in demand in the financial sector.
A recent significant increase in hiring along with normal turnover and retirements mean that a continuous learning environment is necessary to enable employees to meet the challenges of a constantly changing environment. Not having sufficient skill sets in place can result in an over reliance on certain key resources, which can have stress related implications.
Systems
Enabling technology and a robust, secure and well-supported information technology (IT) infrastructure are key success factors to OSFI in meeting its mandate. OSFI must ensure that the necessary information systems and infrastructure are in place to effectively support its supervisory and regulatory activities. The implementation of the IM/IT strategy is underway and is being closely monitored and evaluated.
Changes to International Financial Reporting Standards (IFRS)
With most of OSFI’s regulated institutions using IFRS this year, key accounting changes proposed by the International Accounting Standards Board (IASB) will impact both our institutions and OSFI. Key changes that we are actively working on or monitoring and communicating with our stakeholders on are accounting for insurance liabilities; off balance sheet vehicles (de-recognition and consolidation); loan impairment; financial instruments; and financial statement presentation. As a reliance-based regulator, it is crucial that OSFI understand and, when practicable, work with the IASB to ensure such changes are representative of the risk of the business of our institutions so that OSFI will continue to be able to perform accurate risk assessments of financial institutions and will be able to adjust its regulatory capital framework as required.
Summary of Performance
The tables below identify OSFI’s financial and human resources, planned and actual, for the 2010-2011 fiscal year.
2010-2011 Financial Resources (Millions)
| Planned Spending | Total Authorities | Actual Spending |
|---|---|---|
| $109.2 | $109.2 | $105.9 |
2010-2011 Human Resources (FTEs)
| Planned | Actual | Difference |
|---|---|---|
| 543 | 557 | 14 |
OSFI’s total 2010-2011 spending of $105.9 million is $3.3 million (3.0%) lower than its planned spending of $109.2 million. The incremental cost of 14 additional full-time equivalents (FTEs) was offset by savings from the deferral of, or project delivery efficiencies gained within major information technology projects; the cessation of OSFI’s International Assistance program activity; lower travel costs resulting from the continued judicious management of these costs in light of the government’s specific action to limit discretionary spending; and lower training costs due to more in-house facilitation of training and capacity limitations to attend all planned training.
Strategic Outcome 1: A safe and sound Canadian financial system.
A properly functioning financial system is one that consumers and other stakeholders (inside and outside Canada) have a high degree of confidence in and that makes a material contribution to Canada’s economic performance. OSFI is the primary regulator and supervisor of all federally registered financial institutions, numbering 431 at March 31, 2011, and some 1,396 federally registered private pension plans. The achievement of OSFI’s strategic outcomes, which are shared by partners within government and the private sector, provides an essential foundation for a productive and competitive economy.
OSFI safeguards depositors, policyholders and private pension plan members by enhancing the safety and soundness of federally regulated financial institutions and private pension plans. Three program activities support this strategic outcome:
- Regulation and Supervision of Federally Regulated Financial Institutions (FRFIs)
- Regulation and Supervision of Federally Regulated Private Pension Plans
- International Assistance4
On a triennial basis, OSFI engages an independent organization to conduct the Financial Institutions Survey5 (FIS), which includes surveying and interviewing Chief Executive Officers, Chief Agents, Principal Officers and other senior executives of deposit-taking institutions (banks and trust companies) and insurance companies. The FIS was completed during 2010-2011 and included measuring the performance indicator for Strategic Outcome One. Results indicate a strong majority (92%) of respondents believe OSFI is effective in monitoring and supervising their company / institution.
4 Effective March 31, 2010, OSFI ceased its International Assistance program activity – refer to Section II - 1.3 Program Activity: International Assistance for further information.
5 The Strategic Counsel, an independent research firm, conducted the consultations on OSFI’s behalf. In the spring and summer of 2010, 191 Chief Executive Officers, Chief Agents, Principal Officers and other senior executives of deposit-taking institutions (banks and trust companies) and insurance companies (Life, P&C and Fraternal) participated in the study.
The table below presents a summary of OSFI’s performance during the 2010-2011 fiscal year towards achieving its first strategic outcome.
| Performance Indicators | Targets | 2010-11 Performance |
|---|---|---|
| Percentage of knowledgeable observers that rate OSFI as somewhat or very effective in monitoring and supervising their institution or pension plan.6 | 70% | A strong majority (92%) of FRFI senior executives believe OSFI is effective in monitoring and supervising their company / institution. Source: Report on Financial Institutions Survey 20107 |
| Percentage of estimated recoveries on failed institutions (amount recovered per dollar of claim). | 90% | Total weighted average recoveries were 97% at 2010-2011 year end, which exceeds the set target of 90%. Source: Canada Deposit Insurance Corporation, Agents, Liquidators |
| Percentage of estimated recoveries on pension plans that have terminated under-funded. | 85% | One pension plan terminated under-funded in 2010-2011. The recovery rate for this plan was 94%. Source: Internal data |
| Percentage of respondents that rate the assistance / presentations provided as relevant to their work. | 80% | Last measured in 2009-2010: 88% of respondents rated the assistance / presentations as relevant to their work. Source: Survey of International Advisory Group (IAG) program participants8 2009-2010 |
6 Senior Executives, Plan Administrators, and professionals who act on behalf of federally regulated financial institutions and pension plans.
7 The Strategic Counsel, an independent research firm, conducted the consultations on OSFI’s behalf. In the spring and summer of 2010, 191 Chief Executive Officers, Chief Agents, Principal Officers and other senior executives of deposit-taking institutions (banks and trust companies) and insurance companies (Life, P&C and Fraternal) participated in the study. This is a completion rate of approximately 73% of eligible institutions. The identity of respondents was not disclosed to OSFI. The report is available on OSFI’s Consultations and Surveys Web page.
8 Surveys were provided to workshop participants when IAG staff were the primary presenters. IAG delivered 30 such workshops in 2009-2010, with 923 participants. A total of 776 surveys were completed, for a response rate of 84%.
The table below presents OSFI’s planned and actual spending by program activity for Strategic Outcome 1, and a comparison to actual spending in the previous year.
| Program Activity | 2009-2010 Actual Spending |
2010-2011 | Alignment to Government of Canada Outcomes | |||
|---|---|---|---|---|---|---|
| Main Estimates |
Planned Spending |
Total Authorities |
Actual Spending |
|||
| 1.1 Regulation and Supervision of Federally Regulated Financial Institutions | $52.8 | $54.6 | $54.6 | $54.6 | $55.5 |
|
| 1.2 Regulation and Supervision of Federally Regulated Private Pension Plans | $4.3 | $5.3 | $5.3 | $5.3 | $4.5 |
|
| 1.3 International Assistance | $1.7 | $1.6 | $1.6 | $1.6 | $0.4 |
|
| Total (millions) | $58.8 | $61.5 | $61.5 | $61.5 | $60.4 | |
OSFI’s actual spending in 2010-2011 towards its Strategic Outcome 1 was $60.4 million, $1.1 million, or 1.8%, lower than planned. The decrease is primarily related to the cessation of the International Assistance program activity and the later than planned start of the development phase in the Risk Assessment System for Pensions (RASP) project. The higher spending in the Regulation and Supervision of Federally Regulated Financial Institutions program activity relates to costs associated with an increase of 7 FTEs. This is partially offset by lower than planned travel and training costs as explained in the opening paragraph under Summary of Performance.
The increase in actual spending of $1.6 million, or 2.7%, from the previous year is mainly attributed to a growth of 16 FTEs through filling approved vacancies and normal economic and merit increases, offset by savings from the cessation of the International Assistance program activity. The spending of $0.4 million in 2010-2011 in this program activity relates to the costs to transition its activities to the Toronto International Leadership Centre.
Strategic Outcome 2: A financially sound and sustainable Canadian public retirement income system.
This strategic outcome is supported by the Office of the Chief Actuary (OCA). The OCA is continuously involved in preparing various experience studies and research covering a wide range of social security, demographic and economic issues that may affect the financial status of pension or benefits plans. Some of these studies also serve to support policy makers in developing and analysing various policy options in the context of plan reforms. The information presented in these studies could benefit private sector organizations that evaluate social security or private pension plan schemes.
In 2010-2011, the OCA maintained the tradition of continual improvements to actuarial methods by applying more extensive research and sophisticated methods toward developing actuarial assumptions, as recommended by the Canada Pension Plan (CPP) Peer Review Panel. These improvements were reflected in the 25th CPP Actuarial Report.
The most recent external peer review was completed in March 2011. The external peer review panel’s report received in March 2011 states that the 25th Actuarial Report meets all professional standards of practice and statutory requirements. The achievement of OSFI’s second strategic outcome provides an essential contribution to income security for Canadians.
The table below presents a summary of OSFI’s performance during the 2010-2011 fiscal year towards achieving its Strategic Outcome 2.
| Performance Indicators | Targets | 2010-11 Performance |
|---|---|---|
| Panel of Canadian peer actuaries selected by an international and independent body attest that the Chief Actuary and staff have adequate professional experience, complete work in compliance with professional standards and statutory requirements, access adequate information and complete relevant data tests and analysis, use reasonable methods and assumptions in completing actuarial reports and that these reports fairly communicate the results of the work performed. | Unanimous agreement amongst peers |
The external peer review panel’s findings received in March 2011 show there is unanimous agreement that the Chief Actuary and staff have adequate professional experience, complete work in compliance with professional standards and statutory requirements, access adequate information and complete relevant data tests and analysis, use reasonable methods and assumptions in completing actuarial reports and that the 25th Actuarial Report on the Canada Pension Plan (CPP) fairly communicates the results of the work performed by the Chief Actuary and his staff. Source: Review of the Twenty-Fifth Actuarial Report on the Canada Pension Plan dated 16 March 2011, conducted by the CPP Actuarial Review Panel. |
|
Adequacy of professional experience of the Chief Actuary and staff. AND/OR Compliance with Canadian and international professional standards. |
Unanimous agreement amongst peers Unanimous agreement amongst peers |
The external peer review panel’s findings received in March 2011 were that the 25th Actuarial Report on the Canada Pension Plan complies with all relevant professional standards of practice and statutory requirements, and that the professional experience of the Chief Actuary and his staff who worked on this report meets the high standard required for this work. Source: Review of the Twenty-Fifth Actuarial Report on the Canada Pension Plan dated 16 March 2011, conducted by the CPP Actuarial Review Panel. |
The table below presents OSFI’s planned and actual spending by program activity for Strategic Outcome 2, and a comparison to actual spending in the previous year.
| Program Activity | 2009-2010 Actual Spending |
2010-2011 | Alignment to Government of Canada Outcomes | |||
|---|---|---|---|---|---|---|
| Main Estimates |
Planned Spending |
Total Authorities |
Actual Spending |
|||
| 2.1 Actuarial Valuation and Advisory Services | $4.2 | $4.3 | $4.3 | $4.3 | $4.2 |
|
| Total (millions) | $4.2 | $4.3 | $4.3 | $4.3 | $4.2 | |
OSFI’s actual spending in 2010-2011 towards its Strategic Outcome 2 was $4.2 million, which is $0.1 million or 2.3%, lower than planned. The variance is mainly due to lower human resources costs resulting from vacancies during the year. Year-over-year expenditures are flat as the increase in human resources costs, largely related to normal economic and merit increases, are offset by a reduction in capital spending for computer equipment.
| Program Activity | 2009-2010 Actual Spending |
2010-2011 | Alignment to Government of Canada Outcomes | |||
|---|---|---|---|---|---|---|
| Main Estimates |
Planned Spending |
Total Authorities |
Actual Spending |
|||
| Internal Services | $37.9 | $43.4 | $43.4 | $43.4 | $41.3 | N/A |
| Total (millions) | $37.9 | $43.4 | $43.4 | $43.4 | $41.3 | |
OSFI’s actual spending in 2010-2011 for Internal Services was $41.3 million, which is $2.1 million, or 4.8%, lower than planned. The variance is largely due to savings from the deferral of major information technology projects as explained in the opening paragraph under Summary of Performance.
The increase in actual spending of $3.4 million, or 9.0%, from the previous year is attributed to an increase of 11 FTEs from the filling of approved vacancies and the full year impact of new resources hired in the previous year to enhance the Corporate Services Sector so as to support the significant growth in OSFI’s supervisory and regulatory staff complements in the past few years; normal economic and merit increases; and by an increase in IM/IT Consulting Costs associated with the initial phase of the implementation of the approved IM/IT Strategy.
Expenditure Profile
The “Spending and Full-Time Equivalents” table presents a five year trend of OSFI’s planned and actual spending, and actual FTEs. OSFI’s human resources costs typically account for approximately 75% of its spending, which explains the correlation between the spending and FTE trend lines. During 2007-2008, OSFI increased its FTEs by 2.9% from the previous year in order to direct more resources on enhanced identification of emerging risks and on monitoring institutional and market resilience in response to the prevailing global economic and financial market events. OSFI further increased its staff complement by 4.6% in 2008-2009 by hiring employees with special knowledge of credit, market and operational risks to focus more effort on higher risk institutions and products, and the early detection of problem loan portfolios. In 2009-2010, OSFI’s FTEs increased by 10.4% driven by the full year impact of new resources hired during the previous year and due to new positions added to enhance the Corporate Services Sector to support the significant growth in staff complement in the past few years. In 2010-2011, OSFI increased its regulatory resources to support the need for new and more sophisticated risk-sensitive liquidity, leverage and capital rules, to enhance its specialization in the Life and P&C industries and to fulfill its international commitments. This resulted in a further 5.1% growth in its FTEs.
OSFI’s total actual spending rose by 1.4% in 2007-2008 and by 5.9% in 2008-2009. During this period, OSFI completed several major enabling technology projects in support of information management, Basel II, enhanced reporting and analytics (business intelligence), and commenced in 2006-2007 the first phase of its Pensions Processes and Systems Renewal Initiative. The first phase was largely completed during 2008-2009. The second phase of this project began in 2009-2010 and is expected to be completed early 2012-2013. Total spending in 2009-2010 increased by 11.2% over the prior year. The increase is attributed to a 10.4% increase in FTEs, normal economic and merit increases in employee compensation and the 15-basis-point increase in the Employee Benefit Plan rate as prescribed by TBS. In 2010–2011, OSFI’s expenses grew by 4.9% largely due to the full year impact of the additional resources added in 2009-2010 and higher IM/IT Costs associated with the implementation of OSFI’s approved IM/IT Strategy.
Estimates by Vote
For information on our organizational votes and/or statutory expenditures, please see the 2010–11 Public Accounts of Canada (Volume II) publication. An electronic version of the Public Accounts is available at http://www.tpsgc-pwgsc.gc.ca/recgen/txt/72-eng.html.