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Section II – Analysis of Program Activities by Strategic Outcome

The following section describes OSFI’s program activities and identifies the expected results, performance indicators and targets for each of them. This section also explains how OSFI plans on meeting the expected results and presents the financial and non-financial resources that will be dedicated to each program activity.

2.1 Strategic Outcome One – A safe and sound Canadian financial system.

2.1.1 Program Activity: Regulation and Supervision of Federally Regulated Financial Institutions

Human Resources (FTEs) and Planned Spending ($ millions)
2011–2012		2012–2013		2013–2014
FTEs	Planned Spending	FTEs	Planned Spending	FTEs	Planned Spending
341	57.8	339	58.9	339	60.5

Program Activity Expected Results	Performance Indicators	Targets
Protect depositors and policy holders while recognizing that all failures cannot be prevented.	Percentage of estimated recoveries on failed institutions. (amount recovered per dollar of claim)	90%
Accurate risk assessments.	Percentage of knowledgeable observers3 who agree that their institution's Composite Risk Rating is appropriate.	70%
Timely and effective intervention and feedback.	Time to issue Supervisory Letter. (within prescribed target days)	80% of letters are issued within 45 days
Regulations, guidance and other rules that balance prudential considerations and the need to compete.	Percentage of knowledgeable observers3 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.	50%
Regulations, guidance and other rules which are clear and scrutinized by industry.	Percentage of knowledgeable observers3 that rate OSFI's guidance as somewhat or very effective in providing an indication of OSFI's expectation. AND/OR Percentage of knowledgeable observers3 who rate OSFI as good or very good at consulting with industry on the development of regulations, guidelines and other rules.	75% 60%
Prudentially sound decisions which are transparent.	Percentage of knowledgeable observers3 who understand somewhat or very well the basis upon which OSFI makes its decisions as part of the approval process.	85%
Regulatory approvals which are timely.	Percentage of completed applications for regulatory approvals that are processed within established performance standards.	90%

³ Senior Executives and professionals who act on behalf of federally regulated financial institutions.

Program Activity Summary

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; monitor system-wide or sectoral issuesthat may impact FRFIs 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 covered under the Bank Act, Trust and Loan Companies Act, Insurance Companies Act and Cooperative Credit Associations Act. OSFI also provides supervision services to the provinces, for which its costs are recovered on a fee for service basis.

This program has three sub-activities:

1. Risk Assessment and Intervention: This program involves the administration and application of an effective supervisory process to assess the safety and soundness of FRFIs by evaluating an institution’s risk profile, financial condition, risk management processes, and compliance with applicable laws and regulations. This program includes activities to monitor and supervise financial institutions; monitor industry and environmental factors to identify emerging risks; and intervene by exercising supervisory powers to take, or require management or boards to take, necessary corrective measures in a timely manner to protect depositors and policy holders, while recognizing that all failures cannot be prevented.   
2. Regulation and Guidance: This program involves advancing and administering a regulatory framework that promotes the adoption of sound risk management practices, policies and procedures. This program encompasses the development of regulations, the issuance of guidance, providing input into federal legislation and regulations affecting financial institutions; contributions to accounting, auditing and actuarial standards; and involvement in international regulatory activities.
3. Approvals and Precedents: Federally regulated financial institutions are required to seek regulatory approval for certain types of transactions.  This program: evaluates and processes applications for regulatory consent; establishes positions on the interpretation and application of the federal financial institutions legislation and regulations; identifies precedential transactions that may raise policy issues and develops rulings that recognize the need to allow institutions to compete effectively while undertaking reasonable risks that do not unduly impact OSFI’s primary stakeholders, the policyholders and depositors of FRFIs.

Planning Highlights

In order to achieve the expected result, OSFI plans to undertake the following:

• Improve our ability to identify, monitor and report on emerging risks including system-wide risks that may have a material impact on the Canadian financial system:
  • Enhance OSFI’s use of stress testing to better assess risk and capital adequacy.
  • Perform selected comparative reviews of FRFIs in key risk areas, such as Structural Interest Rate Risk (SIRR), or Asset Liability Management (ALM) risk.
  • Internationally, continue to participate in discussions (such as the Financial Stability Board (FSB), the Basel Committee on Banking Supervision (BCBS), the International Association of Insurance Supervisors (IAIS), and Senior Supervisors Group (SSG)) to identify and respond to the key issues arising from global financial events, including future changes to regulatory approaches and requirements, and to make recommendations for action. Domestically, continue work with Financial Institutions Supervisory Committee (FISC) partners and the regulated industries on similar issues in the Canadian context.
• Put into practice updates made to the Supervisory Framework including an enhanced Quality Assurance process.
• Maintain strong communications and continue to promote improved risk management practices with FRFIs.
• Enhance risk sensitivity of capital requirements in the insurance sector.
• Ensure that capital adequacy rules are interpreted and operationalized effectively and consistently within industry sectors.
• Continue to implement the transition to IFRS by assessing the impact on FRFIs and pension plans, and by addressing implications to OSFI’s prudential regime, regulatory policies, and regulatory returns.
• Continue to work with a variety of stakeholders on various IFRS issues including Insurance Contracts Phase II to understand the future impact on OSFI's reliance based regime and on insurers.

Benefits for Canadians

A prudentially sound financial system, in which depositors and policy holders have a high degree of confidence, materially contributes to Canada’s economic performance. OSFI is the primary regulator and supervisor of all federally registered financial institutions, numbering about 450. The achievement of OSFI’s strategic objectives, which are shared by partners within government and the financial institutions OSFI regulates, provides the foundation upon which the Canadian economy has the potential to be both productive and competitive.

Canadians will continue to benefit from a regulatory environment which encourages sound risk management practices and discourages excessive risk taking. 

OSFI supports the government’s priority regarding issues of safety and security by contributing to the fight against money laundering and the financing of terrorism.  As an example, by providing consolidated lists of officially listed terrorists and terrorist organizations, OSFI is assisting financial institutions with their legal obligations to identify and freeze assets of these individuals and entities.  In addition, in conjunction with Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), OSFI conducts reviews of anti-money laundering / anti-terrorism financing programs established by financial institutions.

2.1.2 Program Activity: Regulation and Supervision of Federally Regulated Private Pension Plans

Human Resources (FTEs) and Planned Spending ($ millions)
2011–2012		2012–2013		2013–2014
FTEs	Planned Spending	FTEs	Planned Spending	FTEs	Planned Spending
26	5.6	26	4.6	26	4.7

Program Activity Expected Results	Performance Indicators	Targets
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.	85%
Regulations, guidelines and other rules which are clear and balanced.	Percentage of knowledgeable observers4 that rate OSFI's guidance as somewhat or very effective in providing an indication of OSFI's expectation. AND/OR Percentage of knowledgeable observers4 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.	75% 50%
Regulatory approvals which are timely and transparent.	Percentage of knowledgeable observers4 that understand somewhat or very well the basis upon which OSFI makes its decisions as part of the approval process. AND/OR Percentage of completed applications for regulatory approvals that are processed within established benchmarks.	60% 90%

⁴ Plan Administrators and professionals who act on behalf of pension plans.

Program Activity Summary

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. 

Planning Highlights

In order to achieve the expected results, OSFI plans to undertake, in addition to ongoing activities, the following initiatives:

• Build, test and implement systems to support the pensions risk assessment framework published in 2009;
• Update and enhance guidance for pension plans to support recent amendments to thelegislation and regulations and new supervisory priorities⁵; and
• Refine the monitoring of risks facing pension plans, including the impact of rule changes, and adjust supervisory processes as warranted.

⁵ This includes guidance on stress testing, investments, disclosure guideline as a result of changes to the Pension Benefits Standards Act, 1985.

Benefits for Canadians

OSFI supports the government’s priority for income security for Canadians.  OSFI supervises 1,398 federally regulated private pension plans in Canada, which cover 637,000 active members as at March 31, 2010.  OSFI works to promote responsible pension plan governance and actuarial practices.  OSFI’s actions and decisions affect plan members as well as the sponsors and administrators of the plans.

2.1.3 Program Activity: International Assistance

Human Resources (FTEs) and Planned Spending ($ millions)
2011–2012		2012–2013		2013–2014
FTEs	Planned Spending	FTEs	Planned Spending	FTEs	Planned Spending
0	0.0	0	0.0	0	0.0

Program Activity Summary

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. 

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 is expected to be modified during 2011-2012 to reflect the elimination of this program activity, through an annual update process coordinated by the Treasury Board Secretariat.

2.2 Strategic Outcome Two – A financially sound and sustainable Canadian public retirement income system.

2.2.1 Program Activity: Actuarial Valuation and Advisory Services

Human Resources (FTEs) and Planned Spending ($ millions)
2011–2012		2012–2013		2013–2014
FTEs	Planned Spending	FTEs	Planned Spending	FTEs	Planned Spending
33	4.5	33	4.6	33	4.7

Program Activity Expected Results	Performance Indicators	Targets
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 his staff. AND/OR Compliance with Canadian and international professional standards.	Unanimous agreement amongst peers*
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%
CPP and OAS Triennial Actuarial Reports	Timeliness of tabling in Parliament of Reports on Canada Pension Plans & Old Age Security.	100% by the deadline
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*
Public Sector Triennial Actuarial Reports	Timeliness of tabling in Parliament of Reports on Public Pension Plans.	100% by the deadline
Accurate and high quality actuarial valuations of the Canada Student Loans Program 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 Canada Student Loans Program are comprehensive (accurate, high quality) and informative of future costs and provision rates of the program.	Annual renewal of the MOU with HRSDC
Actuarial Report on the Canada Student Loans Program	Timeliness of tabling in Parliament of Reports on Canada Student Loans.	100% by the deadline set by HRSDC
* Independently selected panel of peers.

Program Activity Summary

The federal government and the provinces, through the Canada Pension Plan (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 activity 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 activity provides a range of actuarial services to the stewards of the CPP and some federal government departments. As required by legislation, it conducts statutory actuarial valuations of the CPP, Old Age Security (OAS) and Canada Student Loans programs, 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 Office of the Chief Actuary (OCA) is funded by fees charged for its actuarial valuation and advisory services and by an annual parliamentary appropriation.

This program has three sub-activities:

1. Services to the CPP and OAS Program: This program involves the conduct of statutory actuarial valuations of the CPP and OAS Program. These valuations estimate the financial status of these plans and programs as required by legislation. This program estimates long-term expenditures, revenues and current liabilities of the CPP and estimates long-term future expenditures for OAS programs.  Pursuant to the Canada Pension Plan and the Public Pensions Reporting Act, the OCA prepares statutory triennial actuarial reports on the financial status of these programs, as required by legislation.
2. Services to Public Sector Pension and Insurance Programs: This program involves the conduct of statutory actuarial valuations of various federal public sector employee pension and insurance plans. These valuations estimate the financial status of these plans as required by legislation. Pursuant to the Public Pensions Reporting Act, this program involves preparing statutory triennial actuarial reports on the financial status of federal public sector employee pension and insurance plans covering the federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police, the federally appointed judges and Members of Parliament.  This program supports plan members, thereby serving the public interest, by ensuring good governance of the plan, appropriate disclosure in the actuarial reports and contributing to the overall accountability of the plan sponsor to members. This program also involves the provision of sound actuarial advice that assists different government departments in the design, funding and administration of these plans. As part of this program, the Chief Actuary submits the actuarial reports to the President of Treasury Board, with the exception of the Actuarial Report on the RCMP (Dependants) Pension Fund, which is submitted to the Minister of Finance.
3. Services to the Canada Student Loans Program (CSLP): Pursuant to the Canada Student Financial Assistance Act, this program involves the conduct of statutory actuarial valuations of the CSLP. The program also involves the preparation of a statutory actuarial reportof the CSLP by evaluating the portfolio of loans and the long-term costs of the program. As part of this program, the Chief Actuary submits the actuarial report to the Minister of Human Resources and Skills Development Canada.
   

Planning Highlights

In order to achieve the expected results, OSFI plans to undertake the following activities:

• The Actuarial Reports for the OAS, CSLP, CFSA-Regular Force, the CFSA-Reserve Force, and the Regular Force Death Benefit Account will be sent to the appropriate Minister.
  

Benefits for Canadians

Canada has set in place a public pensions system that is expected to be sustainable and affordable well into the future in the face of changing demographic conditions.  While OSFI does not supervise public pensions, the OCA prepares statutory actuarial reports on various public pension programs, to come to conclusions about the financial sustainability under certain assumptions. In this way, the OCA provides appropriate checks and balances on the future costs of the different pension plans and social programs that fall under its responsibilities.

2.3 Program Activity: Internal Services

2.3 Program Activity: Internal Services

Human Resources (FTEs) and Planned Spending ($ millions)
2011–2012		2012–2013		2013–2014
FTEs	Planned Spending	FTEs	Planned Spending	FTEs	Planned Spending
163	49.7	163	47.4	163	48.0

Program Activity Expected Results	Performance Indicators	Targets
OSFI’s financial statements accurately reflect the financial position of OSFI.	An audit by the Office of the Auditor General attests that OSFI's financial statements present fairly, in all material respects, the financial position of OSFI at the year-end and the results of its operations and its cash flows for the year in accordance with GAAP.	N/A
OSFI maintains or improves its strong performance on its Results-based Management Accountability Framework, (MAF) as assessed by Treasury Board from time to time.	Treasury Board’s next assessment of OSFI’s MAF indicates equal or improved ratings, including in the two areas where, in the last assessment, Treasury Board suggested a need to focus.	N/A
Operational units within program support are efficient and effective, i.e. deliver services at reasonable cost and turn-around time relative to peers. AND Operational units are operating within applicable acts, policies and guidelines.	Treasury Board’s audits of OSFI, in the scope of its government-wide Horizontal Audits, confirm no material findings for OSFI. AND Internal Audits of reviewed units find that controls are in place and units are operating within applicable acts, policies and guidelines, and/or identify areas for action.	N/A
A stable, committed and skilled workforce.	Knowledgeable observers6 are of the view that OSFI staff knowledge is good or very good. AND Voluntary turnover reports are satisfactory.  AND Employee Survey finds that OSFI employees are committed and the consolidated mean score of the Employee Survey has increased since the last survey.	N/A
Multi-year Information and Technology Renewal (ITR) Program remains dynamic and evolves to accommodate OSFI's changing strategic directions, priorities and resource constraints.	ITR Program is implemented as per established timelines and targeted results are achieved.	N/A

⁶ Senior Executives, Plan Administrators, and professionals who act on behalf of federally regulated financial institutions and pension plans.

Program Activity Summary

OSFI’s Internal Services program activity supports its two strategic outcomes.  Activities include developing and implementing cost-effective, secure and reliable information management systems that contain relevant, accurate and timely internal and external data. These information systems are complemented by the development and delivery of effective financial, human resources and administration, security, communication and administrative policies, advice and guidance. The objective is to ensure that OSFI has the processes and systems in place to enable a motivated and skilled workforce to focus on its supervisory and regulatory activities.

Planning Highlights

For the 2011-2012 planning period, key planning highlights for OSFI’s Internal Services include:

• A High-Performing and Effective Workforce
  • Continue to identify changing human resources requirements (through ongoing HR Planning including succession planning) 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; and
• An Enhanced Corporate Infrastructure
  • Continue to implement the long-term strategies for Information Management and Information Technology necessary to support our evolving supervisory and regulatory activities.

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