Panel discussion with Tolga Yalkin at the Responsible Investment Association Conference

OSFI’s Assistant Superintendent, Regulatory Response Sector, Tolga Yalkin participates in a panel discussion titled “2024 Regulatory Roundtable – Critical Developments and What to Anticipate” at the Responsible Investment Association (RIA) Conference

Moderator: Tolga, can you share with us how OSFI is then yet different again from what we’ve heard so far? What makes your role different and how does it fit within this regulatory shift?

Assistant Superintendent Tolga Yalkin:

• Regulatory direction
  • What makes OSFI different is that it is our job to provide the structure or frame within which financial institutions manage risks and, at the end of the day, ensure that they are, indeed, managing them appropriately.
  • Climate change impacts financial institutions’ safety and soundness because it will alter the cash flows generated by some financial assets and businesses.
  • Stronger and more frequent natural disasters are changing the economic fundamentals in some insurance segments, and increasing constraints relating to GHG emitting energy sources are elevating financial and reputational risks.
  • The physical and transition implication associated with climate change are driving traditional risks financial institutions face, like credit, market, insurance, and operational risk.
  • In response, we have published a number of initiatives over the last year to promote robust climate risk management by financial institutions, such as our Guideline B-15, climate regulatory return, and Standardized Climate Scenario Exercise.
• Convergence in sustainability standards
  • Convergence in sustainability, and harmonizing regulatory requirements, offer benefits to financial institutions. With respect to climate risk, we recognize this will underscoring the value in domesticating standards for Canada to ensure they are fit for purpose.
  • For this reason, we updated Annex 2-2 of our Guideline B-15 last March to align it with the International Sustainability Standards Board’s (ISSB) final IFRS S2 Climate-related Disclosures standard. This streamlines climate-related reporting and promotes transparency of climate risk.
  • We will closely monitor the CSSB consultation, and once the CSSB finalizes its standards, we will look to incorporate them into the guideline to ensure consistent expectations for our institutions and avoid fragmentation of climate related information out to the market.
• Adopting international standards
  • When it comes to developing regulatory approaches for Canada, we participate in the activities led by various international standard-setting bodies, including the Basel Committee on Banking Supervision (BCBS), the Financial Stability Board (FSB) and the International Association of Insurance Supervisors (IAIS), to name a few.
  • Once international standards have been developed, we take note of how they are being adopted by other jurisdictions, especially those where our financial institutions may be active.
  • Our job is to look at these standards and ask ourselves what makes sense from a Canadian perspective. In doing this, we carefully consider the risk we think the international standard addresses, but also how it would impact the ability of financial institutions to compete effectively and take reasonable risks.