OSFI’s Near-Term Plan of Prudential Policy for Federally Regulated Financial Institutions and Federally Regulated Private Pension Plans
Information
Table of contents
To: Federally Regulated Financial Institutions, Federally Regulated Private Pension Plans
OSFI’s Mandate and Strategic Goals
OSFI acts to protect the rights and interests of depositors, policyholders, financial institution creditors and pension plan beneficiaries while having due regard for the need to allow financial institutions to compete effectively and take reasonable risks. Among other things, OSFI issues guidance for federally regulated financial institutions (FRFIs) and federally regulated pension plans (FRPPs) that sets prudential expectations for their management and mitigation of risk.
OSFI’s Strategic Plan focuses on improving FRFI and FRPP preparedness and resilience to financial risks both now and in the next stress event, and preparing them to deal with non-financial risks before they negatively affect their financial condition. OSFI also aims to improve its agility and operational effectiveness and preserve the support of Canadians and the financial industry.
In support of the Strategic Plan , this document sets out, a near-term plan of guidance priorities for FRFIs and FRPPs for the next year until March 31, 2022, the references below reflect the calendar quarters for this time period.
Background on OSFI Guidance
What is OSFI Guidance?
Guidance forms a key component of OSFI’s regulatory framework. It establishes OSFI’s expectations in terms of prudential limits, capital and liquidity adequacy, disclosures, legislative and reporting requirements, and sound risk management practices.
OSFI guidance may take a number of forms, depending on the circumstances and objectives. Guidelines for FRFIs set OSFI’s main expectations, and are principles-based and proportionate to FRFIs of different size, complexity and risk profile. In the case of FRPPs, OSFI’s guidelines typically provide clarity on rules and requirements set out in legislation and regulation. OSFI uses Advisories and Rulings (for FRFIs) or Newsletters (for FRPPs) to clarify existing legislation or expectations in guidelines, or bridge a transition to more enduring guidance. From time-to-time, as required, OSFI also issues Letters that highlight timely issues or concerns and articulate OSFI expectations.
OSFI’s Forward Agenda
Guidance Priorities
OSFI has divided its guidance priorities into four streams Risk Management Guidance for FRFIs and FRPPs , Risk Management Guidance for FRFIs, Capital and Accounting Guidance for FRFIs and Guidance for FRPPs.
During the coming year we will continue delivering on OSFI’s mandate by designing and setting policy priorities that reflect the risk environment as well as meeting our operational responsibilities in private pension plans and regulatory approvals. Our plan is centered on the need to be relevant, responsive and realistic. While conditions have become more stable, risks and uncertainty remain in the financial sector. We are planning for the new business-as-usual, but in all cases remain vigilant so that our prudential priorities continue to ensure that Canada’s financial system remains strong and resilient.
The timelines indicated below are reflective of the current OSFI strategic plans. Plans may be subject to change or amended due to external factors. In that event, OSFI will reconsider the dates for the guidance impacted.
Risk Management Guidance for both FRFIs and FRPPs
| Timeframe | Guidance Initiative | Purpose and Background |
|---|---|---|
| Q3 2021 | Industry Letter on Climate-related Risks | Summarizes feedback received on OSFI’s Climate-related Risks Discussion Paper issued in Q1 2021 and setting out OSFI’s proposal for future climate related risk initiatives. |
Risk Management Guidance for FRFIs
| Timeframe | Guidance Initiative | Purpose and Background |
|---|---|---|
| Q2 2021 | Industry Letter on Technology Risk | Summarize feedback received on OSFI’s Technology Risk Discussion Paper issued in Q3 2020 and sets out future guidance initiatives. |
| Industry Letter on Anti-Money Laundering and Terrorist Financing | Summarize feedback received from a consultation on Guideline E-13 and B-8 conducted in Q4, 2020 and sets out next steps for Guideline B-8. | |
| Final Guideline E-4 for foreign branches | Establish OSFI expectations for all foreign branches; and replace E4A for Chief Agents of foreign insurance company branches and E4B for Principal Officers of foreign bank branches. | |
| Q3 2021 | Industry Letter on Operational Resilience | Seek views on integrating new Basel Committee on Banking Supervision Principles for Sound Management of Operational Risk and Principles for Operational Resilience into OSFI’s guidance. |
| Q4 2021 | Final Guideline B-2 on property and casualty large exposures | Establish OSFI’s expectations with respect to large exposures of property and casualty insurance companies. |
| Final Guideline B-3 on insurance practices and procedures | Establish OSFI’s expectations related to reinsurance practices. | |
| Draft Guideline on Technology Risk / Cyber | Develop OSFI’s expectations for technology and cyber risk management. | |
| Q1 2022 | Draft revised Guideline B-10 on third party risk | Develop OSFI’s expectations for third party risk. |
| Industry Letter on advanced analytics and model risk | Develop OSFI’s expectations for advanced analytics and model risk. | |
| Consultative document on culture and reputation risk | Develop OSFI’s expectations for culture and reputation risk. |
Capital and Accounting Guidance for FRFIs
| Timeframe | Guidance Initiative | Purpose and Background |
|---|---|---|
| Q2 2021 | Discussion Paper on the assurance of capital, leverage and liquidity returns | Develop OSFI’s expectations on assurance of DTI and insurance capital, leverage and liquidity returns. |
| Q4 2021 | Draft Guideline on assurance of capital, leverage and liquidity returns | Develop OSFI’s expectations on assurance of DTI and insurance capital, leverage and liquidity returns. |
| Q1 2022 | Final Guideline on assurance of capital, leverage and liquidity returns | Develop OSFI’s expectations on assurance of DTI and insurance capital, leverage and liquidity returns. |
| Timeframe | Guidance Initiative | Purpose and Background |
|---|---|---|
| Q2 2021 | Data Maintenance Expectations for Institutions Using the Standardized Approach for Operational Risk | Draft expectations for data maintenance for institutions that are using the Standardized Approach for operational risk under Chapter 3 of the Capital Adequacy Requirements Guideline. |
| Advisory regarding Global Systemically Important Banks (G-SIB) Disclosure Requirements | This clarifies the implementation of the disclosure requirements on G-SIB indicators in Canada. | |
| Draft Guideline – Credit Valuation Adjustment (CVA) risk | Covers potential changes related to CVA risk. | |
| Q3 2021 | Draft Guideline – Pillar 3 disclosure expectations for small and medium-sized deposit-taking institutions | Draft guideline outlining a more proportional set of Pillar 3 disclosure requirements for small and medium-sized banks to coincide with the implementation of the Basel III reforms. |
| Q3 2021 | SMSB survey with respect to Pillar 2 Capital and Liquidity Requirements | Intended to inform potential future revisions to OSFI’s processes and guidance for Pillar 2 capital and liquidity expectations for small and medium sized banks. |
| Q4 2021 | Consultation document on unencumbered assets and pledging | Considers possible changes to OSFI’s current regulatory guidance and monitoring practices pertaining to unencumbered assets and pledging activities. |
| Final Guidelines - Domestic implementation of the Basel III Reform Package, including Pillar 3 disclosure expectations | Final guidance related to credit risk, operational risk, market risk, CVA risk, the output floor, the leverage ratio, the definition of capital, and Pillar 3 disclosures. | |
| Final Guidelines - Proportionality of requirements for small and medium-sized deposit-taking institutions, including Pillar 3 disclosure expectations. | Final guidelines outlining a more proportional set of capital and liquidity requirements for small and medium-sized banks to coincide with the implementation of the Basel III reforms and Pillar 3 disclosures. | |
| Q1 2022 | Draft Guideline on unencumbered assets and pledging | Considers possible changes to OSFI’s current regulatory guidance and monitoring practices pertaining to unencumbered assets and pledging activities. |
| Timeframe | Guidance Initiative | Purpose and Background |
|---|---|---|
| Q1 2021 | Semi-annual IFRS 17 progress reporting | Insurers reporting to OSFI on IFRS 17 implementation progress. |
| Q2 2021 | Final IFRS 17 Regulatory Returns | Regulatory Returns reflecting impact of adopting IFRS 17. |
| Draft LICAT, MCT, MICAT guidelines, for IFRS 17 | Covers updates to the capital frameworks for insurers triggered by IFRS 17. | |
| Q3 2021 | Semi-annual IFRS 17 progress reporting | Insurers reporting to OSFI on IFRS 17 implementation progress. |
| Consultation on draft methodology for determining capital requirements for Segregated Fund Guarantee (SFG) Risk | QIS 5 and public consultation of the draft Chapter 7 of LICAT (i.e. the draft standard approach) and SFG-related regulatory returns |
Guidance for FRPPs
| Timeframe | Guidance Initiative | Purpose and Background |
|---|---|---|
| Q2 2021 | Final instruction guides for pension plan terminations | Establishes OSFI’s expectations related to filing and reporting requirements for defined benefit and defined contribution pension plan terminations. |
| Q3 2021 | Conclusion of consultation process and instruction guides for pension plan registrations | Establishes OSFI’s expectations related to filing and reporting requirements for defined benefit and defined contribution pension plan registrations. |
| Q4 2021 | Conclusion of consultation process and instruction guide for the preparation of actuarial reports (incorporates changes that adjust liabilities for plans using replicating portfolios) | Sets out the reporting requirements of actuarial reports filed with OSFI for defined benefit pension plans. |
| Final instruction guide for authorizing benefit reductions | Sets out the factors that OSFI considers with respect to an application seeking the Superintendent’s authorization for a benefit reduction. | |
| Q1 2022 | Discussion Paper – Pension Plan Investment Risk Management | Considers possible changes to OSFI’s current guidance pertaining to pension plan investment risk management. |