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The original version was signed by
The Honourable James M. Flaherty
Minister of Finance
SECTION I: DEPARTMENTAL OVERVIEW
Section II: ANALYSIS OF PROGRAM ACTIVITIES BY STRATEGIC OUTCOME
SECTION III: SUPPLEMENTARY INFORMATION
SECTION IV: OTHER ITEMS OF INTEREST
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.
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.
OSFI's legislated mandate was implemented in 1996 and under the legislation, OSFI’s mandate is to:
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.
Primary to OSFI’s mandate and central to its contribution to Canada’s financial system are two strategic outcomes:
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.
The following tables present a summary of achievements against OSFI’s operational and managerial priorities in 2010-2011.
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.
|
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.
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:
3 Private demand includes consumption/investment/net-exports expenditure (e.g., spending/purchases) and excludes government expenditure.
Other considerations are the following.
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.
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.
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.
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.
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.
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.
The tables below identify OSFI’s financial and human resources, planned and actual, for the 2010-2011 fiscal year.
Planned Spending | Total Authorities | Actual Spending |
---|---|---|
$109.2 | $109.2 | $105.9 |
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:
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.
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.
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.
A safe and sound Canadian financial system.
This program involves regulating and supervising FRFIs to determine whether they are in sound financial condition and are complying with their governing law and supervisory requirements; monitoring the financial and economic environment to identify issues that may impact these institutions negatively; and intervening in a timely manner to protect depositors and policyholders from undue loss, while recognizing that management and boards of directors are ultimately responsible, and that financial institutions can fail.
Costs for this program are recovered through base assessments and user fees and charges paid by the FRFIs covered under the Bank Act, Trust and Loan Companies Act, Insurance Companies Act and Cooperative Credit Associations Act. OSFI also receives revenues for cost-recovered services to provinces, for which it provides supervision of their institutions on a fee for service basis.
This program has three sub-activities:
Sub-Activity | Planned Spending | Total Authorities | Actual Spending |
---|---|---|---|
Risk Assessment and Intervention | $37.6 | $37.6 | $38.5 |
Regulation and Guidance | $11.9 | $11.9 | $12.0 |
Approvals and Precedents | $5.1 | $5.1 | $5.0 |
Total | $54.6 | $54.6 | $55.5 |
Sub-Activity | Planned | Actual | Difference |
---|---|---|---|
Risk Assessment and Intervention | 237 | 243 | 6 |
Regulation and Guidance | 62 | 66 | 4 |
Approvals and Precedents | 29 | 26 | (3) |
Total | 328 | 335 | 7 |
The related expected results, performance indicators, targets, and performance status for the three interrelated activities in this program activity are identified in the summary on the next page.
Expected Results |
Performance Indicators |
Targets | Performance Status |
---|---|---|---|
Protect depositors and policyholders while recognizing that all failures cannot be prevented. | Percentage of estimated recoveries on failed institutions9 (amount recovered per dollar of claim) Source: Canada Deposit Insurance Corporation, Agents, Liquidators | 90% |
Exceeded Total weighted average recoveries were 97% at 2010-2011 year end. |
Sub-Activity 1.1.1: Risk Assessment and Intervention | |||
Accurate risk assessments. | Percentage of knowledgeable observers who agree that their institution's Composite Risk Rating is appropriate. Source: Report on Financial Institutions Survey 2010 | 70% |
Exceeded 91% of FRFI senior executives believe that their company / institution’s Composite Risk Rating is appropriate.
|
Timely and effective intervention and feedback. | Time to issue Supervisory Letter (within prescribed target days) Source: Internal | 80% (of letters are issued within 45 days) |
Mostly Met 77% of supervisory letters were issued within the 45-day standard in 2010-2011, a slight improvement over the previous year at 76%.
|
Sub-Activity 1.1.2: Regulation and Guidance | |||
Regulations, guidelines and other rules that balance prudential considerations and the need for institutions to compete. | Percentage of knowledgeable observers who rate OSFI as good or very good at developing regulations, guidelines and other rules that strike an appropriate balance between prudential considerations and the need for institutions to compete. Source: Report on Financial Institutions Survey 2010 | 50% |
Exceeded 67% of FRFI senior executives rate OSFI as good or very good at developing regulations and guidance that strike an appropriate balance between prudential considerations and the need for institutions to compete.
|
Regulations, guidelines and other rules which are clear and scrutinized by industry. |
Percentage of knowledgeable observers who rate OSFI's guidance as somewhat or very effective in providing an indication of OSFI's expectation. AND/OR Percentage of knowledgeable observers who rate OSFI as good or very good at consulting with industry on the development of regulations, guidelines and other rules. Source for both: Report on Financial Institutions Survey 2010 |
75%
60% |
Exceeded 89% of FRFI senior executives rate OSFI as somewhat effective or better on how effective its guidance is in providing an indication of OSFI’s expectations.
Exceeded 77% of FRFI senior executives rate OSFI as good or very good at consulting with the financial services industry when developing regulations and guidelines.
|
Sub-Activity 1.1.3: Approvals and Precedents | |||
Prudentially sound decisions which are transparent. | Percentage of knowledgeable observers who understand somewhat or very well the basis upon which OSFI makes its decisions as part of the approval process. Source: Report on Financial Institutions Survey 2010 | 85% |
Met All 85% of FRFI senior executives understand somewhat or very well the basis upon which OSFI makes decisions.
|
Regulatory approvals which are timely. |
Percentage of completed applications for regulatory approvals that are processed within established performance standards. Source: Internal
|
90% |
Exceeded 98% of approvals subject to the deeming provision were processed prior to the date on which they would have been deemed approved. All other performance standards established under the User Fee Act and the Policy on Service Standards for External Fees were met or exceeded in the year under review.
|
9 This measure is a proxy for whether OSFI intervened early enough to prevent undue loss to depositors and/or policyholders. Estimated recovery is the amount on the dollar per claim each policyholder or depositor would receive upon the completion of the liquidation. Expectation > $0.90.
Throughout 2010-2011, OSFI continued to exercise a heightened level of monitoring and scrutiny of financial institutions and markets, while taking into account the ongoing economic recovery, especially in Canada. We updated our Supervisory Framework, strengthened the design and application of supervisory processes, and targeted cross-sector reviews in areas identified as high risk, including corporate governance and stress testing.
OSFI continued to collaborate with international and domestic partners to develop and implement improved risk management and supervisory practices as follows:
OSFI also:
During 2010-2011, OSFI continued to promote sound risk management practices through its regulation and guidance activities. Evidence of the results of robust risk management can be found in the World Economic Forum’s ranking of Canada’s banking system10 as the soundest for the third year in a row.
OSFI played a key role in encouraging the development of international rules that balance safety and soundness with the need for financial institutions to be able to compete effectively and on a level playing field. Specifically, OSFI:
10 See “World Economic Forum Ranks Canadian Banks Soundest in the World for the Third Consecutive Year” at the following link: http://www.fin.gc.ca/n10/10-078-eng.asp
With respect to capital adequacy, OSFI:
OSFI also:
In keeping with OSFI's and the Government of Canada's commitment to enhance accountability and transparency relating to services provided, OSFI has performance standards establishing time frames for processing applications for regulatory approval and for other services. In 2010-2011, OSFI met or exceeded all of these standards.
OSFI also:
OSFI conducts rotating consultations with key stakeholders in various industry sectors, which allow OSFI to assess its effectiveness and fulfill its commitment to continuous improvement. During 2010-2011, a confidential consultation with life insurance companies and a survey of senior executives of federally regulated financial institutions were conducted to explore industry perceptions of OSFI’s performance. Findings from these two studies can be found at http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?DetailID=649
The global banking situation highlighted the key role that liquidity plays in the overall safety and soundness of FRFIs. As a result, OSFI intensified its assessments of liquidity by considering the level, risk, and management processes for liquidity at FRFIs. This is described in OSFI’s Supervisory Framework which was updated in February 2011.
FRFIs’ Boards of Directors ultimately determine the risk appetite of an organization. Hence, Corporate Governance reviews continue to be an important component of our work, to ensure, among other things, that the Board receives appropriate information about the risks taken in the FRFI and approves the policies for the organization at the appropriate level.
A key lesson from the financial crisis was that better risk assessment and supervision cannot be one-off exercises but rather have to be ongoing efforts. One challenge for OSFI is to address continuous improvements to prudential regulatory and supervisory approaches while not imposing changes at such a fast pace that the industries cannot properly internalize the changes and adjust their practices and, as a result, adjust to the new requirements with a narrow compliance objective. Through discussion and consultations with industry, OSFI has been conveying the message that financial institutions must take more ownership of the assessment of their risks and develop appropriate risk mitigation strategies.
OSFI continues to find that significant changes to accounting standards require early involvement and close consultation and communication with standard setters, other regulators and both international and domestic industry. Thus OSFI will continue to proactively work with all stakeholders as key accounting standards are developed.
As a result of the financial crisis, the international community is moving to a tighter regulatory environment to enhance the safety and resilience of both the domestic and global financial systems. While new prudential requirements are being developed and implemented, OSFI continues to adopt a prudent approach when analysing requests for regulatory approvals by measuring the impact that new capital, accounting or other regulatory requirements might have on the applicant’s business. Nonetheless, in 2010-2011, OSFI continued to make every effort to ensure applicants were not impeded from following viable business strategies, and that requests for regulatory approvals were processed on a consistent and timely basis.
This program involves regulating and supervising federally regulated private pension plans to determine whether they are meeting minimum plan funding requirements and are complying with their governing law and supervisory requirements. This program provides risk assessments of pension plans covering employees in federally regulated areas of employment; timely and effective intervention and feedback to protect the financial interests of plan members and beneficiaries from undue loss, while recognizing that plan administrators are ultimately responsible, and that plans can fail; a balanced relevant regulatory framework; and a prudentially effective and responsive approvals process. This program incorporates risk assessment and intervention, regulation and guidance, and approvals and precedents related to federally regulated private pension plans under the Pension Benefits Standards Act, 1985. The costs for this program are recovered from pension plan fees based on the number of members in each federally regulated pension plan.
Planned Spending | Total Authorities | Actual Spending |
---|---|---|
$5.3 | $5.3 | $4.5 |
Planned | Actual | Difference |
---|---|---|
27 | 29 | 2 |
The under spending of $0.8 million is primarily due to the later than planned start of the development phase of the new RASP project, as explained in the “Summary of Performance” section of this report.
The related expected results, performance indicators, targets, and performance status for this program activity are identified in the summary below.
Expected Results |
Performance Indicators |
Targets | Performance Status |
---|---|---|---|
Protect the financial interests of federally regulated private pension plan members and beneficiaries. | Percentage of estimated recoveries on pension plans that have terminated under-funded. Source: Internal Data | 85% |
Exceeded One pension plan terminated under-funded in 2010-2011. The recovery rate for this plan was 94%. |
Regulations, guidelines and other rules which are clear and balanced. |
The description of this indicator was changed effective 2010-2011 to the following: Percentage of knowledgeable observers that rate OSFI's guidance as somewhat or very effective in providing an indication of OSFI's expectation. AND/OR Percentage of knowledgeable observers who rate OSFI as being good or very good at developing regulations, guidelines and other rules that strike an appropriate balance between interests of plan sponsors and plan members. Source for both: Pension Plans Survey 200911 |
75%
50%
|
Mostly Met The previous indicator was last measured in 2008-2009: 60% of plan administrators rate OSFI as being good or better at developing regulations, guidelines and other rules that are clear and easy to understand. Exceeded Last measured in 2008-2009: 61% of plan administrators rate OSFI as good or better.
|
Regulatory approvals which are timely and transparent. |
The description of this indicator was changed effective 2010-2011 to the following: Percentage of knowledgeable observers that understand somewhat or very well the basis upon which OSFI makes its decisions as part of the approval process. Source: Next Pension Plans Survey in 2011/2012 AND/OR Percentage of completed applications for regulatory approvals that are processed within established benchmarks. Source: Internal |
60%
90% |
Exceeded The previous indicator was last measured in 2008-2009: 61% of plan administrators rate OSFI as being good or better at its transparency, that is, the rationale for OSFI’s recommendations and decisions of the Pensions Approvals process.
Exceeded 97% of approval applications were processed within benchmarks in 2010-2011.
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11 OSFI provided TNS Canadian Facts/The Antima Group, an independent research firm, with a list of administrators and professionals of the federally regulated private pension plans it regulates. The research firm invited the administrators and professionals to participate in either an online or a telephone survey-247 pension plan administrators and 30 professionals participated resulting in a response rate of 34.7%. OSFI does not know which administrators or professionals participated. The report is available at http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?DetailID=649.
The main pillars of OSFI’s risk assessment framework for pension plans are: tiered risk indicators, solvency testing, on-site examinations, the watch list, use of intervention powers and ad hoc reviews. OSFI:
OSFI:
OSFI continued to improve timeliness of pension approvals while ensuring complex transactions are carefully considered. In addition, the number of transactions requiring the Superintendent’s approval has decreased compared to the previous year. OSFI processed 88 applications for approval and received 72 new requests, compared to 153 processed applications and 130 new requests in 2009-2010. As a result, OSFI has cut the number of outstanding requests for approval by 36% in 2010-2011.
OSFI also published an updated approval instruction guide to the pension industry on asset transfers related to defined benefit plans.
The lessons learned from the 2008 financial crisis remain relevant for pension plans today. Economic growth has resumed but uncertainties remain and solvency positions have not returned to pre-crisis levels.
The past year saw a modest improvement in the financial position of private defined benefit pension plans and significant progress in implementing the federal government’s reforms aimed at enhancing the security of pension benefits and helping pension plans cope with market volatility.
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.
Despite the broad economic recovery that took hold in 2010, some pension plans continue to face funding challenges.
OSFI continues to emphasize the importance of effective risk management by pension plan administrators.
This program incorporates activities related to providing assistance to selected developing and emerging market economies to improve their supervisory systems in line with international banking and insurance supervisory standards, thereby enhancing the stability of the global financial system. In order to achieve efficiency and economy in program delivery and training of supervisors from many different jurisdictions, this program also collaborates with a number of regional banking and insurance associations and other technical assistance providers such as the Financial Stability Institute. The costs for this program are recovered via Memoranda of Understanding between OSFI and the Canadian International Development Agency.
Planned Spending | Total Authorities | Actual Spending |
---|---|---|
$1.6 | $1.6 | $0.4 |
Planned | Actual | Difference |
---|---|---|
5 | 2 | (3) |
Effective March 31, 2010, OSFI ceased its International Assistance program activity, which provided technical assistance to supervisory systems in emerging market economies. The Canadian International Development Agency (CIDA) has continued the program in partnership with the Toronto International Leadership Centre for Financial Sector Supervision.
OSFI's Program Activity Architecture was modified, effective the 2012-2013 planning and reporting cycle, to reflect the elimination of this program activity, through an annual update process coordinated by the Treasury Board Secretariat.
Not applicable - see performance summary above.
A financially sound and sustainable Canadian public retirement income system.
The federal government and the provinces, through the CPP, public sector pension arrangements and other social programs have made commitments to Canadians and have taken on emanated responsibility for the financing of these commitments. Some are long-term and it is important that decision-makers, Parliamentarians and the public understand these and the inherent risks. This program plays a vital and independent role in this process. It provides checks and balances on the future costs of the different pension plans under its responsibilities.
This program provides a range of actuarial services, under legislation, to the CPP and some federal government departments. It conducts statutory actuarial valuations of the CPP, Old Age Security (OAS) and Canada Student Loans Program (CSLP), and pension and benefits plans covering the Federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police (RCMP), federally appointed judges, and Members of Parliament.
The OCA is funded by fees charged for its actuarial valuation and advisory services and by an annual parliamentary appropriation.
Planned Spending | Total Authorities | Actual Spending |
---|---|---|
$4.3 | $4.3 | $4.2 |
Planned | Actual | Difference |
---|---|---|
31 | 29 | (2) |
Program Activity 2.1 is supported by three distinct Sub-Activities: CPP and OAS, Public Pension Plans, and Canada Student Loans. The related expected results, performance indicators, targets, and performance status are identified in the summary table below.
Expected Results |
Performance Indicators |
Targets | Performance Status |
---|---|---|---|
Stewards of Canada’s public retirement income system are provided with independent, accurate, high quality and timely professional actuarial services and advice. |
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* |
Met All
Met All The external peer review panel’s findings received in March 2011 reports that work on the 25th Actuarial Report on the Canada Pension Plan complies with all relevant professional standards of practice and statutory requirements, and that the Chief Actuary and his staff have adequate professional experience.
|
Sub-Activity 2.1.1: Canada Pension Plan and Old Age Security | |||
Accurate and high quality actuarial valuations inform CPP and OAS stakeholders and Canadians of the current and projected financial status of the Plan and Program. |
Reviews are comprehensive (methods, assumptions, analysis). AND/OR Percentage of the recommendations within the scope and influence of the OCA that are implemented before the next peer review. |
Unanimous agreement amongst peers*
80% |
Met All Met All The external peer review of the 25th CPP Report received in March 2011 found the reviews are comprehensive.12 The OCA has begun implementing external peer review’s recommendations and plans to complete 80% by the next independent peer review scheduled for 2013-2014. |
CPP and OAS Triennial Actuarial Reports | Timeliness of tabling in Parliament of Reports on CPP & OAS. | 100% by the deadline |
CPP: Met All
|
Sub-Activity 2.1.2: Public Pension Plans | |||
Accurate and high quality actuarial valuations of Public Pension and Insurance Plans provided to departments to inform design, funding and administration of plans. |
Reviews are comprehensive (methods, assumptions, analysis). AND/OR Actuarial opinion is appropriate. |
Unanimous agreement amongst peers* Unanimous agreement amongst peers* |
Met All
Met All The Office of the Auditor General (OAG) draft report received in September 2010 found that the reviews are comprehensive.
|
Public Sector Triennial Actuarial Reports |
Timeliness of tabling in Parliament of Reports on Public Pension Plans. |
100% by the deadline |
Met All The Actuarial Report on the Pension Plan for Federally Appointed Judges as at 31 March 2010 was tabled in Parliament on time.
|
Sub-Activity 2.1.3: Canada Student Loans | |||
Accurate and high quality actuarial valuations of the CSLP inform the Department of Human Resources and Skills Development Canada (HRSDC) of the future costs and provision rates of the program. | Actuarial valuations of the CSLP are comprehensive (accurate, high quality) and informative of future costs and provision rates of the program. | Annual renewal of the MOU with HRSDC |
Met All Since 2009, the OCA is the mandatory service provider for actuarial valuations of the program as per section 19.1 of the Canada Student Financial Assistance Act.
|
Actuarial Report on the CSLP |
Timeliness of tabling in Parliament of Reports on Canada Student Loans.
|
100% by the deadline set by HRSDC |
Exceeded The Actuarial Report on the CSLP as at 31 July 2009 was tabled by the deadline.
|
*Independently selected panel of peers. |
12 The OCA is required by law to produce an actuarial report on the CPP every three years, and the CPP Peer Review is also conducted triennially. The most recent review was completed March 2011, and the next CPP actuarial report will be published in 2013, with the independent peer review scheduled for 2013-2014.
The OCA is required by law to produce an actuarial report on the Canada Pension Plan every three years. The 25th Actuarial Report on the CPP as at December 31, 2009 was tabled before Parliament on November 15, 2010. Prepared by the Chief Actuary, this triennial actuarial report on the CPP involves projections of CPP revenues and expenditures over the 75-year projection period, so that the future impact of historical and projected trends in demographic and economic factors can be properly assessed.
The CPP provides protection to millions of Canadian workers and their families against the loss of income due to retirement, disability and death. In 2010, about five million Canadians received CPP benefits, with a total value of approximately $32 billion. Canadians want to feel confident that the CPP will be able to meet their needs in future years. The actuarial report provides Canadians with the most recent information on the financial status of the Plan.
The report finds that under the 9.9% legislated contribution rate, the assets are projected to grow rapidly over the next 11 years as contribution revenue is expected to exceed expenditures over that period. Assets will continue to grow thereafter until the end of the projection period, but at a slower pace, reaching a level of 5.2 years of annual Plan expenditures by 2050. Despite the projected substantial increase in benefits paid as a result of an aging population, the CPP is expected to be able to meet its obligations throughout the projection period and to remain financially sustainable over the long term, with assets projected to accumulate to $275 billion by the end of 2020. However, the report cautioned that if recent short-term improvements in life expectancies continue, especially for ages 75 to 89, it could put additional pressure on the minimum contribution rate that could cause the rate to increase above 9.9%.
The OCA commissioned an external peer review of the 25th CPP Actuarial Report. First introduced in 1999, the external peer review of actuarial reports by an independent panel of reviewers is intended to ensure that actuarial reports meet high professional standards and are based on reasonable assumptions in order to provide sound actuarial advice to Canadians.
The independent panel’s findings confirm that the work performed by the OCA on the 25th CPP Actuarial Report meets all professional standards of practice and statutory requirements, and that the assumptions and methods used are reasonable. The panel also stated that the report fairly communicates the results of the work performed by the Chief Actuary and his staff.
The Canadian Institute of Actuaries standard on assumptions requires that the assumptions, individually and in the aggregate, should be appropriate. The panel has concluded that the assumptions adopted for the 25th CPP Actuarial Report are within the reasonable range, both individually and in the aggregate, and are therefore appropriate.
The external peer review of the 25th CPP Actuarial Report is public, as were previous peer reviews of the CPP Actuarial Reports, and is available on the OSFI Web site under OCA.
The statutory Actuarial Report on the Canada Student Loans Program as at July 31, 2009 was tabled before Parliament on June 14, 2010 in accordance with the Canada Student Financial Assistance Act.
The report presents the results of an actuarial review of the CSLP as at July 31, 2009 and includes projections of future costs of the Program through loan year 2033-2034. An actuarial review of the CSLP is prepared to provide an evaluation of the Program’s overall financial costs and increase the level of information available to Parliament and the public.
The Actuarial Report on the Pension Plan for the Federally Appointed Judges as at March 31, 2010 was tabled by the President of the Treasury Board on December 15, 2010. The report shows the financial status of this pension plan.
Released in March 2011, the results of the external peer review not only found that most aspects of the 25th Actuarial Report on the CPP were adequate, but also listed various recommendations for improvements for the next triennial review. The recommendations covered, among others, factors such as data, methodology, communication of results, and other actuarial issues. The OCA is developing an action plan to address these recommendations by the next external peer review in order to improve the quality of the reports, thus improving the OCA’s actuarial services and advice. In particular, the peer reviewers welcomed changes to the 25th CPP Report that enhanced CPP stakeholders’ understanding of the uncertainty inherent in the Chief Actuary’s best-estimate of the future contribution rates. The OCA will continue searching for better ways to increase the understanding of the future costs and inherent risks of the programs under the OCA’s scope by decision makers, Parliamentarians, and the public.
OSFI’s Internal Services program activity supports its two strategic outcomes. Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.
Planned Spending | Total Authorities | Actual Spending |
---|---|---|
$43.4 | $43.4 | $41.3 |
Planned | Actual | Difference |
---|---|---|
152 | 162 | 10 |
The increase in FTE is largely attributed to filling approved vacancies to support the significant growth in OSFI’s supervisory and regulatory staff complements in the past few years, as explained in the “Summary of Performance” section of this report.
In 2010-2011, OSFI's internal communication strategy focussed on engaging its employees and on promoting transparency. Regular town hall meetings and memos from the Superintendent, members of the Executive Committee and senior management kept employees informed of the latest developments and major initiatives. Throughout the year, OSFI continued to share its position and key messages on current issues with employees. Orientation sessions and in-house presentations by subject-matter experts helped new and existing staff learn about OSFI processes and stay abreast of changes within OSFI and in the external environment.
In response to trends to global information sharing and enhanced financial reporting and risk assessment, the IM/IT division developed a new strategy in 2009-2010 to meet the need for increased flexibility in OSFI’s technology systems.
In 2010-2011, the IM/IT division launched an Information Technology Renewal program to guide the implementation of the strategy. Progress included completion of a series of core infrastructure improvements as well as enhancements to OSFI’s internal financial systems as a result of the 2011 implementation of International Financial Reporting Standards (IFRS).
Key system upgrades and renewal projects were initiated, including a new pension plan supervisory system, upgrades to OSFI’s Web site and document management software, and planning commenced for a new Tri-Agency Database System (used by OSFI, the Bank of Canada and the Canada Deposit Insurance Corporation to collect, validate, manage and maintain financial returns).
External factors (e.g., international discussion on the future of regulation of the global financial system and the transition to International Financial Reporting Standards) continued to have a significant impact on OSFI’s business and people in 2010-2011. Significant internal factors include an aging population, the need for continuous learning and development, and the need to have the right processes and people in place to conduct our business in a period of projected government restraint.
To mitigate such risks, OSFI develops an annual Human Resource (HR) plan that outlines the major human resource opportunities and challenges facing the organization, and the strategies we will undertake to address them.
OSFI is funded mainly through asset-based, premium-based or membership-based assessments on the financial institutions and private pension plans that OSFI regulates and supervises, and a user-pay program for selected services. OSFI also receives revenues for cost-recovered services and a parliamentary appropriation for actuarial services relating to public sector employee pension and insurance plans.
OSFI operated on a full accrual accounting basis according to Generally Accepted Accounting Principles for publicly accountable Canadian reporting entities during the year and adopted International Financial Reporting Standard (IFRS) effective April 1, 2011. Overall, OSFI recovered all its expenses for the fiscal year 2010-2011. The tables and charts below provide highlights from OSFI’s Balance Sheet and Statement of Operations and Comprehensive Income, as presented in its audited financial statements. As such, there are differences between these tables and those presented in other sections of the Departmental Performance Report, which are prepared on the modified cash basis of accounting in accordance with the Guide to the Preparation of Part III of the 2010-11 Estimates. Typically the differences result from the accounting treatment of capital expenditures and accounts receivable.
% Change | 2010-2011 | 2009-2010 | |
---|---|---|---|
Total assets | 1.8% | $66,985 | $65,808 |
Total liabilities | 3.1% | $39,447 | $38,270 |
Equity of Canada | 0.0% | $27,538 | $27,538 |
Total | 1.8% | $66,985 | $65,808 |
The change in OSFI’s total assets is predominantly related to an increase in Accounts Receivable due to the later than usual base assessment billing for the Life and Property & Casualty (P&C) insurance industries.
The change in OSFI’s total liabilities is mainly attributed to increases in accrued liabilities related to unearned base assessments and pension plan fee revenues. The unearned revenues represent amounts collected in advance of the incurrence of costs.
% Change | 2010-2011 | 2009-2010 | |
---|---|---|---|
Total expenses | 4.6% | $108,058 | $103,309 |
Total revenues | 4.6% | $108,058 | $103,309 |
Net cost of operations | 0.0% | $0 | $0 |
OSFI matches its revenue to its operating costs. The 4.6% increase in OSFI’s expenses is largely related to the growth in FTEs as explained in the “Expenditure Profile” section of this report.
OSFI’s Audited Financial Statements, which are published in the Annual Report can be found on the OSFI website at: http://www.osfi-bsif.gc.ca/osfi/index_e.aspx?DetailID=647
All electronic supplementary information tables listed below for the 2010–2011 Departmental Performance Report can be found on the Treasury Board of Canada Secretariat’s website at: http://www.tbs-sct.gc.ca/dpr-rmr/2010-2011/index-eng.asp.
Website:
http://www.osfi-bsif.gc.ca
General enquiries:
Email: information@osfi-bsif.gc.ca
Phone: 1-800-385-8647 (Monday through Friday, between 8:30 a.m. and 6:00 p.m. (Eastern Time).
Head Office and mailing address:
255 Albert Street
Ottawa, Ontario
K1A 0H2
Canada