OSFI Corporate Governance

  1. Role of Corporate Governance in OSFI’s Supervisory Process
    1. Board and sr mgt are key oversight functions
    2. Effective oversight
      • helps protect depositors and p.h.'s,
      • allows OSFI to use work of company’s internal processes to reduce amount of supervision
    3. if company is in trouble, Board is required to seek solutions and oversee implementation of corrective actions.
  2. OSFI’s Supervisory Assessment
    • risk-focused supervision
    • assess safety and soundness, quality of control and governance processes, and regulatory compliance.
    • Open communication between Board and regulators to promote trust and confidence for principles-based system of supervision
    • Board should follow up on recommendations by regulators, and sr mgt action plans to address regulatory matters
  3. Risk Appetite framework
    • contain risk appetite statement and risk limits
    • roles and responsibilities of those overseeing implementation of Framework.
    • integral part of ERM
  4. Key features of Risk appetite statement
    • reflect agg level of risk and type of risk FRFI is willing to accept to achieve business objectives
    • key features:
      1. linked to strategic, capital and financial plans, and compensation programs;
      2. Incl qualitative and quantitative measures that can be agg'd and disagg'd;
      3. forward-looking;
      4. consider normal and stressed scenarios
      5. within regulatory constraints
  5. Risk Appetite Statement - Qualitative and quantitative measures
    • Qualitative:
      • Sig risks firm wants to take / avoid and why;
      • Attitude towards regulatory compliance;
      • U/L assumptions and risks.
    • Quantitative:
      • loss or negative events (earnings, capital, earnings per share at risk) that FRFI is willing to accept
  6. Risk Appetite framework - Risk limits/tolerance
    Allocation of risk appetite statement to:
    • risk categories (credit, market, insurance, liquidity);
    • BU or platform level (retail, capital markets);
    • LOB's or product level (concentration limits);
  7. Implementation of the Risk Appetite Framework
    1. Framework should align with corp strategy, financial plans, daily operations, and risk mgt policies (risk limits, risk selection/UW guidelines)
    2. Control, monitoring and reporting to ensure compliance with Framework incl:
      • CRO to ensure agg risk limits consistent with risk appetite stmt
      • CRO to report to Board and sr mgt assessment against risk appetite stmt
      • Internal Audit routinely assess compliance
      • Board and sr mgt should receive regular reports on effectiveness of, and compliance with, Framework
Card Set
OSFI Corporate Governance
OSFI Corporate Governance