ARCHIVED - Office of the Superintendent of Financial Institutions - Report

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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.

Strategic Outcome One: A safe and sound Canadian financial system.

Program Activity: Regulation and Supervision of Federally Regulated Financial Institutions

Human Resources (FTEs) and Planned Spending ($ millions)

2012-2013		2013-2014		2014-2015
FTEs	Planned Spending	FTEs	Planned Spending	FTEs	Planned Spending
376	65.9	376	68.1	376	70.9

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%
Provide accurate Risk Assessments for institutions which align with their Composite Risk Rating.	Percentage of knowledgeable observers4 that 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 that rate OSFI as being 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	75%
	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.	60%
Provide prudentially sound decisions on Regulatory Approvals.	Percentage of knowledgeable observers3 that understand somewhat or very well the basis upon which OSFI makes its decisions as part of the approval process.	85%
Regulatory approvals that are timely and transparent.	Percentage of completed applications for regulatory approvals that are processed within established performance standards.	90%

Program Activity Summary

This program involves regulating and supervising federally regulated financial institutions (FRFIs) to determine whether they are in sound financial condition and are complying with their governing statute 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 federally regulated financial institutions covered under the Bank Act, Trust and Loan Companies Act, Insurance Companies Act and Cooperative Credit Associations Act. The Office of the Superintendent of Financial Institutions 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:

1. Risk Assessment and Intervention: This program involves the administration and application of an effective supervisory process to assess the safety and soundness of regulated financial institutions 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 the financial and economic environment to identify emerging issues; and intervene on a timely basis when a financial institution's business practices may be imprudent or unsafe, by exercising supervisory powers to take, or require management or boards to take, necessary corrective measures as rapidly as possible 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 of rules and guidance that promotes the adoption by regulated financial institutions of sound risk management practices, policies and procedures designed to plan, direct and control the impact on the institution of risks arising from its operations. This program encompasses the issuance of regulations and guidance, input into federal legislation and regulations affecting financial institutions; contributions to accounting, auditing and actuarial standards; and involvement in a number of 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, regulations and guidance; identifies precedential transactions that may raise policy or precedent-setting issues and develops recommendations that recognize the need to allow institutions to compete effectively while undertaking reasonable risks that do not unduly impact the Office of the Superintendent of Financial Institution's primary stakeholders, the policyholders and depositors of FRFIs.

Planning Highlights

In addition to its core work, OSFI will focus on key strategies, including:

• Continue to participate in international committees such as the FSB, the BCBS, the IAIS, the Joint Forum, and the Senior Supervisors Group (SSG) to represent OSFI's views and contribute to developing final standards to ensure the ability to maintain OSFI's regime. These organizations are focused on identifying and responding to the key issues arising from global financial events, including future changes to regulatory approaches and new principles and rules for more effective prudential regulation. On the domestic front, continue to work closely with Financial Institutions Supervisory Committee (FISC).
• 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 liquidity, retail credit and business models and strategy.
  • Maintain strong communications and continue to promote improved risk management practices in FRFIs with a focus on liquidity, capital management, and corporate governance.
• Ensure that capital adequacy rules are interpreted and implemented effectively within industry sectors.
• Enhance risk sensitivity of capital requirements in the insurance sector.
• Examine FRFI mortgage insurers and report to the Minister of Finance on certain matters related to the Government of Canada's mortgage insurance guarantee framework, as provided for under the new Protection of Residential Mortgage or Hypothecary Insurance Act.
• Continue to monitor changes to IFRS by assessing the impact on FRFIs 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 regime and on insurers.
• Be ready to participate in international peer reviews as they arise.

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

Human Resources (FTEs) and Planned Spending ($ millions)

2012-2013		2013-2014		2014-2015
FTEs	Planned Spending	FTEs	Planned Spending	FTEs	Planned Spending
27	4.5	27	4.6	27	4.8

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 that are clear and balanced.	Percentage of knowledgeable observers5 that rate OSFI's guidance as somewhat or very effective in providing an indication of OSFI's expectation. AND	75%
	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.	50%
Regulatory approvals that 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	60%
	Percentage of completed applications for regulatory approvals that are processed within established benchmarks.	90%

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:

• Continue to develop, test and implement the Risk Assessment System for Pensions (RASP) to support the Risk Assessment Framework for Federally Regulated Private Pension Plans published in 2009.
• Continue to update and enhance guidance for pension plans to support recent amendments to the Pension Benefit Standards Act and regulations.
• Adjust the monitoring of risks facing pension plans, including the impact of rule changes, and adjust supervisory and approval processes as warranted.

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

Program Activity: Actuarial Valuation and Advisory Services

Human Resources (FTEs) and Planned Spending ($ millions)

2012-2013		2013-2014		2014-2015
FTEs	Planned Spending	FTEs	Planned Spending	FTEs	Planned Spending
32	4.6	32	4.9	32	5.1

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 staff. AND Compliance with Canadian and international professional standards.	Unanimous agreement amongst peers*
Accurate and high quality actuarial valuations inform Canada Pension Plan (CPP) and Old Age Security (OAS) stakeholders and Canadians of the current and projected financial status of the Plan and Program.	Peer review attests that actuarial valuations are comprehensive (i.e. examination of actuarial valuation methods, assumptions and analysis). AND	Unanimous agreement amongst peers*
	Percentage of the recommendations within the scope and influence of the OCA that are implemented before the next peer review.	80%
Professional advice provided in CPP and OAS Triennial Actuarial Reports	Reports on Canada Pension Plan & Old Age Security are provided to the Minister on time for tabling in Parliament as per statutory deadlines.	100% by the deadline
Accurate and high quality actuarial valuations of Public Pension and Insurance Plans are provided to departments to inform design, funding and administration of the plans.	Peer review attests that actuarial valuations are comprehensive (i.e. examination of actuarial valuation methods, assumptions and analysis). AND Actuarial opinion is appropriate.	Unanimous agreement amongst peers*
Professional advice provided in Public Sector Triennial Actuarial Reports.	Reports on Public Pension Plans are provided to the Minister on time for tabling in Parliament as per statutory deadlines.	100% by the deadline
Accurate and high quality actuarial valuations inform CSLP stakeholders and Canadians of the future costs and provision rates of the program.	The Office of the Auditor General (OAG) performs an audit of the CSLP and uses work from OSFI's actuarial valuation of the CSLP as audit evidence to support the OAG's independent auditor report for the Public Accounts of Canada.	Confirmation from the OAG
Professional advice provided in Actuarial Report on the Canada Student Loans Program.	Reports on Canada Student Loans are provided to the Minister on time for tabling in Parliament as per statutory deadlines.	100% by the legislated deadline
* Independently selected panel of peers / actuaries.

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 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 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 activity has three sub-activities:

1. Services to the CPP and OAS Program: This program involves the conduct of statutory actuarial valuations of the Canada Pension Plan (CPP) and Old Age Security (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 Canada Pension Plan and estimates long-term future expenditures for Old Age Security programs. Pursuant to the Canada Pension Plan and the Public Pensions Reporting Act, the Office of the Chief Actuary 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.
3. Services to the Canada Student Loans Program (CSLP): Pursuant to the Student Financial Assistance Act, as amended by the Budget Implementation Act, 2009, this program involves the conduct of statutory actuarial valuations of the Canada Student Loans Program (CSLP). The program also involves the preparation of a statutory actuarial report of 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.

Planning Highlights

In order to achieve the expected results the Actuarial Reports for the CSLP, Pension Plan for the Public Service of Canada, Pension Plan for the Royal Canadian Mounted Police and the Public Service Death Benefit Account will be sent to the appropriate Minister.

Program Activity: Internal Services

Human Resources (FTEs) and Planned Spending ($ millions)

2012-2013		2013-2014		2014-2015
FTEs	Planned Spending	FTEs	Planned Spending	FTEs	Planned Spending
174	52.7	173	52.6	173	53.7

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 IFRS.	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 remains acceptable.	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

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

Key planning highlights for OSFI's Internal Services include:

• A High-Performing and Effective Workforce:
  • Implement the HR Plan as committed and monitor and report internally on progress to plan and related risks.
  • Implement two key frameworks: Managing Compensation and Human Resources (HR) management:
    • Implement a compensation framework that guides OSFI's approach to compensation and ensures we continue to recruit, retain and motivate our workforce.
    • Implement a framework for HR Management including governance of the HR function and management of HR programs/processes to ensure that effective "people management" remains an important element of management performance.
• An Enhanced Corporate Infrastructure:
  • Improve the sustainability of effective corporate services by implementing key process documentation and internal controls in a risk-management approach, including:
    • Implementing various internal audit action plans as committed (e.g. planned enhancements to OSFI's Enterprise Risk Management framework and processes) and reporting regularly to OSFI's Audit Committee on achievement of plans.
    • Ongoing development of an Enterprise-wide Internal Control Framework (EICF) as approved by the Executive Committee.
  • Continue to champion the Information Technology Renewal (ITR) program to achieve targeted milestones.
  • Develop an enterprise information and FRFI data management strategy and framework, as per sound Enterprise Information Management (EIM) principles, to ensure OSFI effectively captures and shares information.

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