ARCHIVED - Office of the Superintendent of Financial Institutions Canada
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SECTION II - ANALYSIS OF PROGRAM ACTIVITIES BY STRATEGIC OUTCOME
Analysis by Program Activity
OSFI's ongoing activities consist of the regulation and supervision of federally regulated financial institutions, regulation and supervision of federally regulated private pension plans, international assistance, and provision of actuarial valuation and advice to the federal government. These Program Activities, and select Sub-Activities, support OSFI's two Strategic Outcomes.
This section identifies the financial and human resources allocated to OSFI's program activities and related program priorities, as well as the relevant performance expectations and measures. Program support costs such as information technology, finance and administration have been allocated to the programs based on human resources costs and are included in these numbers. The
management priority related to program support is described in Section IV.
Strategic Outcome 1
Regulate and Supervise to Contribute to Public Confidence in Canada's Financial System and Safeguard from Undue Loss
1.1 Program Activity: Regulation and Supervision of Federally Regulated Financial Institutions3
As mentioned previously, this program is central to OSFI achieving its mandate. It is the largest program activity within OSFI, utilizing the bulk of our financial and human resources. Costs for this program are recovered through assessments, service charges, and user fees paid by the federally regulated financial institutions. Costs are also recovered via Memoranda of
Understanding, as "cost-recovered services" (refer to Financial Information for more details).
(1.1) Financial Resources ($ millions)
| 2008-2009 |
2009-2010 |
2010-2011 |
| $79.6 |
$88.2 |
$85.7 |
(1.1) Human Resources Average Full-Time Equivalents (FTEs)
| 2008-2009 |
2009-2010 |
2010-2011 |
| 389 |
386 |
386 |
Program Activity 1.1 is supported by three interrelated Sub-Activities: Risk Assessment and Intervention, Rule Making and Approvals. The related priorities, expected results and performance measures are identified under each of the three Program Sub-Activities.
3In accordance with the Treasury Board Secretariat's Guide to the Preparation of Part III of the 2008-2009 Estimates, the financial and human resources presented in this RPP reflect OSFI's approved Annual Reference Level Update (ARLU) estimates, prepared in early summer 2007. Recent events in the global financial system require that OSFI
direct more resources to enhanced identification of emerging risks and to monitoring institutional and market resilience to the turmoil. OSFI's capacity to proactively monitor these emerging risks and their impact on the financial institutions and pension plans that it regulates is under review and may result in increases to the resource levels indicated above, particularly in the
Supervision Sector. At time of writing, OSFI was completing its business planning for 2008-2009 to 2010-2011. Changes will be reflected in next year's RPP.
1.1.1 Program Sub-Activity: Risk Assessment and Intervention
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Description |
Monitor and supervise financial institutions; monitor the financial and economic environment to identify emerging issues and risks. Intervene in a timely manner to protect depositors and policyholders while recognizing that OSFI cannot eliminate the possibility of failures. |
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Related Priority |
Ongoing responsibility
- Accurate risk assessments of financial institutions and timely, effective intervention and feedback.
Priority A - Enhanced Identification of Emerging Risks
- Enhance internal processes to improve OSFI's ability to identify, monitor and report on emerging risks to Canada's financial system and the federally regulated financial institutions that operate within it.
Priority B - Institutional and Market Resilience
- Participate in international discussions about key areas arising from the period of market turmoil. Domestically, review selected guidance, plan targeted cross-sector reviews, and liaise with FISC members on issues of concern.
Priority E - Financial Sector Assessment Program (FSAP)/Financial Action Task Force (FATF) Reviews
- Respond to suggestions or recommendations in the Financial Sector Assessment Program (FSAP) report and the Financial Action Task Force (FATF) report
Priority F - Basel II Capital Accord -Post-Implementation Phase
- Monitor banks' transition to Basel II.
- Review capital adequacy assessment processes and relevant policies.
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Expected Results |
Ongoing responsibility
- Protect depositors and policyholders from undue loss while recognizing that all failures cannot be prevented.
- Provide an accurate overall assessment of the risk profile and control functions of the financial institutions it regulates and supervises.
- Produce timely risk assessments and management reports.
Priority A - Enhanced Identification of Emerging Risks
- Enhanced process for identifying market-related issues and emerging risks and assessing their impact on FRFIs.
Priority B - Institutional and Market Resilience
- Respond in a timely fashion, and consistent with the Canadian context, to recommendations arising from ongoing international discussions to identify and discuss the key areas arising from global market turmoil.
Priority E - Financial Sector Assessment Program (FSAP)/Financial Action Task Force (FATF) Reviews
- Respond in a timely manner to any recommendations affecting OSFI which arise from the FSAP.
- Respond in a timely manner to any recommendations affecting OSFI which arise from the FATF.
Priority F - Basel II Capital Accord -Post-Implementation Phase
- OSFI's supervisory activities include monitoring of the performance of Basel II systems and processes for approved approaches.
- OSFI initiates reviews of capital adequacy assessment processes and relevant policies.
- OSFI develops a policy position for target capital ratios and risk floors.
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|
Performance Measure(s) |
Ongoing responsibility
- Estimated recoveries on failed institutions.
- Knowledgeable observers are of the view that their institution's Composite Risk Rating is appropriate.
- Supervisory letters are issued within established targets.
Priority A- Enhanced Identification of Emerging Risks
- Monitoring of FRFIs includes more analysis of the impact of market changes on safety and soundness.
- Comparative reviews related to areas of specific risks are completed.
Priority B- Institutional and Market Resilience
- Knowledgeable observers are of the opinion that OSFI responds in a timely manner to market changes or to industry suggestions that regulations and guidance are out of date.
Priority E - Financial Sector Assessment Program (FSAP)/Financial Action Task Force (FATF) Reviews
- Any recommendations actionable by OSFI are addressed within 12 months of receipt of the FSAP report.
- Any recommendations actionable by OSFI alone are addressed within 12 months of receipt of the FATF report.
Priority F - Basel II Capital Accord - Transition to Implementation Phase
- Monitoring requirements for approved approaches are developed.
- Reviews of selected institutions' internal capital adequacy assessment processes and relevant policies are initiated.
- A policy position for target capital levels and risk floors is developed.
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(1.1.1) Financial Resources ($ millions)
| 2008-2009 |
2009-2010 |
2010-2011 |
| $54.7 |
$60.4 |
$58.8 |
|
1.1.2 Program Sub-Activity: Rule Making
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Description |
Development of guidance and regulations and input into federal legislation affecting financial institutions. Contribute a regulatory perspective to accounting, auditing and actuarial standards as required. Contribute to the development of international prudential rule-making. |
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Related Priority |
Ongoing Responsibility
- A balanced, relevant regulatory framework of guidance and rules for financial institutions that meets or exceeds international minimums.
Priority C - Changes to International Financial Reporting Standards (IFRS)
- Implement the move from Canadian GAAP to IFRS.
Priority D - Minimum Continuing Capital Surplus Requirement (MCCSR)
- Develop and agree on a capital framework for life insurance companies, over a five-year period.
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Expected Results |
Ongoing Responsibility
- In developing, maintaining and contributing to a regulatory framework that meets or exceeds international minimums, OSFI strikes an appropriate balance between prudential considerations and the need for institutions to compete.
- Regulations, guidelines and other rules developed by OSFI are clear and have been scrutinized by industry.
- Competitive, prudent capital rules and regulatory return reporting for Canadian FRFIs consistent with economic realities, Basel rules and IAIS guidance for recognizing capital instruments and significant foreign markets.
Priority C - Changes to International Financial Reporting Standards (IFRS)
- OSFI is able to handle revised accounting changes by developing a plan for addressing resulting changes to policies, data collection and reporting while planning to maintain the strategy of using audited financial statement amounts as the starting point for regulatory purposes.
Priority D - Minimum Continuing Capital Surplus Requirement (MCCSR)
- MCCSR guideline that appropriately addresses risks faced by the life insurance industry and provides a sufficient level of capital for the protection of policyholders.
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Performance Measure(s) |
Ongoing Responsibility
- Knowledgeable observers are of the view that, in developing regulations, guidelines and other rules, OSFI strikes an appropriate balance between prudential considerations and the need for institutions to compete.
- Knowledgeable observers are of the view that regulations, guidelines and other rules developed by OSFI are clear and easy to understand.
- Knowledgeable observers are of the view that OSFI is good at consulting with industry on the development of regulations, guidelines and other rules.
- Through the identification and communication of well-articulated positions, OSFI's prudential issues related to the development of rules are considered by the relevant Canadian and international committees. OSFI succeeds in having high-priority Canadian issues considered appropriately.
Priority C - Changes to International Financial Reporting Standards (IFRS)
Implementation goes smoothly, based on the following:
- Revised capital and/or accounting guidelines and reporting returns are drafted and issued as per planned timelines.
Priority D - Minimum Continuing Capital Surplus Requirement (MCCSR)
- Capital measures implemented are more risk sensitive.
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(1.1.2) Financial Resources ($ millions)
| 2008-2009 |
2009-2010 |
2010-2011 |
| $16.4 |
$18.3 |
$17.7 |
|
1.1.3 Program Sub-Activity: Approvals
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Description |
Approvals include those required under the legislation applicable to financial institutions and other approvals for supervisory purposes. |
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Related Priority |
Ongoing Responsibility
- A prudentially effective, balanced and responsive approvals process.
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Expected Results |
- OSFI's regulatory approvals result in prudentially sound decisions that are transparent.
- Decisions for deemed approvals and for other legislative approvals are completed within specified time limits.
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Performance Measure(s) |
- Knowledgeable observers understand the basis upon which OSFI makes its decisions as p art of the approval process.
- Decisions for deemed approvals and for other legislative approvals are processed within established performance standards.
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(1.1.3) Financial Resources ($ millions)
| 2008-2009 |
2009-2010 |
2010-2011 |
| $8.5 |
$9.5 |
$9.2 |
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1.2 Program Activity: Regulation and Supervision of Federally Regulated Private Pension Plans
| 1.2 Program Activity: Regulation and Supervision of Federally Regulated Private Pension Plans |
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Description |
Incorporates risk assessment, intervention, rule making and approvals 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. |
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Related Priority |
Ongoing Responsibility
- Accurate risk assessments of pension plans, timely and effective intervention and feedback, a balanced, relevant regulatory framework, and a prudentially effective and responsive approvals process.
Priority H - Pensions Systems and Processes
- Enhance OSFI's ability to perform as required in an increasingly complex pension environment.
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Expected Results |
Ongoing Responsibility
- A supervisory program that protects the financial interests of federally regulated pension plan members and beneficiaries.
- A balanced and clear regulatory framework of guidance and rules.
- A timely and transparent approvals process.
Priority H - Pensions Systems and Processes
- Pension systems and processes adequately facilitate pension supervision and approvals.
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Performance Measure(s) |
Ongoing Responsibility
- Recovery on plans terminated under-funded.
- Knowledgeable observers are of the view that:
- regulations, guidelines and other rules are clear and understandable, and strike an appropriate balance between the interests of plan sponsors and plan members;
- the approvals process is transparent: clear and understandable.
- Completed applications for regulatory approval are processed within established benchmarks.
Priority H - Pensions Systems and Processes
- Pension system and process changes are implemented according to agreed-upon timelines.
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(1.2) Financial Resources ($ millions)
| 2008-2009 |
2009-2010 |
2010-2011 |
| $6.5 |
$6.8 |
$6.9 |
|
(1.2) Human Resources Average Full-Time Equivalents (FTEs)
| 2008-2009 |
2009-2010 |
2010-2011 |
| 38 |
37 |
37 |
|
1.3 Program Activity: International Assistance
| 1.3 Program Activity: International Assistance |
|
Description |
This program activity incorporates activities that provide help to other selected countries that are building their supervisory and regulatory capacity. The costs for this program are recovered via Memoranda of Understanding between OSFI and organizations such as the Canadian International Development Agency (CIDA) and the International Monetary Fund
(IMF). The costs of this program activity are clearly tracked; however, given the size of this program (less than 5% of OSFI costs), there is only one sub-activity. |
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Related Priority |
Ongoing Responsibility
- Contribute to awareness and improvement of supervisory and regulatory practices for selected foreign regulators through the operation of an International Assistance Program.
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Expected Results |
- Emerging market economies are more informed about current approaches to regulatory and supervisory systems.
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Performance Measure(s) |
- Workshop participants and clients are of the view that the assistance provided by OSFI is relevant to their work.
- Workshop participants and clients are of the view that OSFI trainers are competent.
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(1.3) Financial Resources ($ millions)
| 2008-2009 |
2009-2010 |
2010-2011 |
| $1.9 |
$2.0 |
$2.0 |
(1.3) Human Resources Average Full-Time Equivalents (FTEs)
| 2008-2009 |
2009-2010 |
2010-2011 |
| 6 |
6 |
6 |
|
Strategic Outcome 2Contribute to Public Confidence in Canada's Public Retirement Income System
This Strategic Outcome is supported by the Office of the Chief Actuary (OCA). The OCA provides expert actuarial valuation reports on the state of various public pension plans. These reports are tabled in Parliament. The OCA also provides advice on the financial implications of related options being considered by the government. The OCA performs three distinct Program
Sub-Activities which are incorporated into the Program Activity described below.
2.1 Program Activity: Office of the Chief Actuary
| 2.1 Program Activity: Office of the Chief Actuary (OCA) |
|
Description |
The OCA provides a range of actuarial services, under legislation, to the Canada Pension Plan (CPP) and some federal government departments. The OCA estimates long-term expenditures, revenues and current liabilities of the CPP and of long-term future expenditures for the Old Age Security (OAS) program, and prepares statutory triennial actuarial reports
on the financial status of the Public Sector Pension and Benefits Plans. The OCA also undertakes the actuarial review of the Canada Student Loans Program (CSLP). |
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Related Priority |
Ongoing Responsibility
- Contribute to public confidence by providing actuarial advice and services to the Stewards of the Canadian public retirement income system in regard to the financial status of the CPP, OAS, Public Sector Plans and the CSLP.
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Expected Results |
- Provide expert and timely actuarial advice in the form of high-quality reports tabled in Parliament, in respect of the CPP.
- Provide expert and timely actuarial advice in the form of high-quality reports, in respect of Public Sector Pension and Benefits Plans.
- Provide expert and timely actuarial advice in the form of high-quality and timely actuarial reports, in respect of the CSLP.
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Performance Measure(s) |
- CPP Peer Review Panel agrees that the Chief Actuary and his staff have adequate professional experience to provide expert advice in regard to, and undertake actuarial valuations of, the CPP.
- The CPP Triennial Actuarial report was completed within legislated requirements and timeframes.
- Independent observers are of the view that reports on the Public Sector Pension & Benefits Plans are comprehensive and that the actuarial opinion is appropriate.
- The Public Sector Actuarial Reports met legislative requirements and timelines.
- The Office of the Chief Actuary is the service provider of choice to complete actuarial reports in respect of the CSLP.
- The CSLP Actuarial Report met agreed-upon requirements and deadlines.
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(2.1) Financial Resources ($ millions)
| 2008-2009 |
2009-2010 |
2010-2011 |
| $5.7 |
$5.9 |
$6.1 |
(2.1) Human Resources Average Full-Time Equivalents (FTEs)
| 2008-2009 |
2009-2010 |
2010-2011 |
| 38 |
38 |
38 |
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