What Is the Office of the Superintendent of Financial Institutions (OSFI)?

The Office of the Superintendent of Financial Institutions (OSFI) is an independent agency of the Government of Canada. The agency is responsible for the supervision and regulation of banks, insurance companies, and trust and loan companies. They also regulate private pension plans which are subject to federal oversight. The agency's stated goals are to protect depositors, policyholders, the financial institution (FI), creditors and pension plan members while allowing financial institutions to compete and take reasonable risks.

Duties and Responsibilities of the OSFI

The OSFI is designed to maintain consumer confidence in the financial markets. To accomplish this goal it guarantees the deposits through the Canadian Deposit Insurance Corporation (CDIC), reviews the pension plans of businesses to ensure that they are adequately funded and helps mitigate the impact of financial issues that may occur. The OSFI is bound to advance and administer a regulatory framework that promotes adopting policies and procedures that are set up for the management of risk. The OSFI is also tasked with monitoring and evaluating system-wide or sectoral issues that may impact institutions negatively.

The OSFI supervises institutions and pension plans to make sure they are financially in good shape. The agency provides oversight that the plans meet the minimum funding requirements and are abiding by their governing laws and supervisory requirements.

The OSFI is expected to provide quick guidance to financial institutions and pension plans if there are financial deficiencies. The office may mandate that management, boards or plan administrators take action to fix identified problems, or, in some cases, take necessary corrective action itself.

Operating as an independent unit within the OSFI is the Office of the Chief Actuary. This office provides a series of actuarial valuation and advisory services to the Government of Canada.

Key Takeaways

  • OSFI supervises and regulates financial institutions and pension plans in Canada.
  • The agency is an independent arm of the Government of Canada.
  • Primary responsibility for the OSFI is to ensure institutions and plans are financially secure.

History of the OSFI

The OSFI reports to the Canadian Minister of Finance. The Office was founded on July 2, 1987, with the combining of the Department of Insurance and the Office of the Inspector General of Banks. A bill passed in May 1996 further clarified the role of the Office, namely that its primary responsibilities are to help minimize losses to individuals and to maintain public confidence in the Canadian financial system. Preventing banks from failing is not part of the agency's directive. However, supporting sound business practices helps reduce the likelihood that a bank or other financial institution will fail.

Real World Example

The OSFI also acts as an information hub for Canadian financial institutions. They periodically post important news and guidelines for the member banks. As an example, in January 2019, they issued an advisory of cybersecurity threats which are becoming increasingly sophisticated and increasing in frequency. OSFI warns these attacks may disrupt interconnected and global financial systems and businesses.

The current Superintendent is Jeremy Rudin, appointed June 2014, for a seven-year term. As Superintendent, Mr. Rudin's role is to represent Canada on the Financial Stability Board Steering Committee and the Standing Committee on Supervisory and Regulatory Cooperation. He also serves on the Council of Governors of the Canadian Public Accountability Board and the board of directors of the Canada Deposit Insurance Corporation.