Thank you, Mr. Chair.
After my short opening statement, I'd be prepared to answer questions on anything you'd like to ask about the office and the operations of the office.
Fundamentally, we are very fortunate, I think, to possess in Canada one of the strongest financial systems in the world. It contributes to the strength and innovation of the economy and protects the savings of individual Canadians. The environment in which OSFI operates, both domestically and internationally, is fluid and at times unpredictable. Maintaining a high level of confidence in the safety of money entrusted to financial institutions and remaining a world-class regulator is very important in our plans and priorities.
We are a prudential regulator, and I want to emphasize the word “prudential”. We focus on safety and soundness, not on so-called market conduct issues of how financial institutions deal with customers.
We've had a legislated mandate from Parliament since 1996. Under the legislation, our mandate has four main elements. These are laid out in the material.
The first part is to supervise federally regulated financial institutions and private pension plans to determine whether they are in sound financial condition, meeting minimum funding requirements, and complying with their governing law and supervisory requirements.
The second part is that if there are material deficiencies, we are to advise institutions and take, ourselves, or require management to take, necessary corrective actions. This includes management, boards of directors, or plan administrators. That's the so-called early intervention part of our mandate, common to many prudential regulators in Canada and around the world.
The third part of our mandate is to advance and administer a regulatory framework that promotes the adoption of policies and procedures by regulated institutions designed to control and manage risk. We do that directly ourselves, through guidelines and so on. We also work with our partners in the Department of Finance and other agencies with respect to the federal legislative framework, and we work with other partners--for example, in the auditing, accounting, and actuarial professions, or internationally--who are developing rules and frameworks applying to these organizations.
Last, we are charged with the monitoring of system-wide or sectoral issues that may impact financial institutions negatively, in pursuit of our overall mandate to protect depositors and policyholders. We contribute to public confidence--that's what our statute says we're supposed to be doing--by pursuing our mandate. Our legislative mandate also explicitly acknowledges the need to allow financial institutions to compete effectively and take reasonable risks. That means for a variety of our activities we're in the business of balancing.
Our mandate recognizes that management and boards of directors and pension plan administrators are ultimately responsible for the operation of their entities, and that financial institutions and pension plans can fail. A well-run system in which Canadians and people outside Canada can have a high degree of confidence is very important, of course, for economic performance, so our priorities are generally pretty broadly aligned with broader government priorities.
We have a variety of partner organizations within government and the private sector. We are involved, of course, pursuant to our mandate, in risk assessment and intervention, in setting rules and guidelines, and in approvals under the various pieces of legislation.
In terms of our budget, our spending in the main estimates is $85 million for fiscal year 2006-07. Virtually all of our operating costs--except for $768,000, which is in relation to the Office of the Chief Actuary--are recovered and paid by the financial institutions and pension plans that we regulate and supervise. That's why you see the net number of $768,000 that's in the votes.
Most of the costs of the Office of the Chief Actuary, which deals with the Canada Pension Plan, with pension plans for members of the public service, pension plans for members of Parliament, judges, and so on, are also recovered from the pension plans or departments for which the Chief Actuary provides valuations or other services. The rest of about $768,000 is recovered out of general revenues.
Our financial statements, which we publish annually, are prepared according to generally accepted accounting principles and are audited annually by the Auditor General.
The following gives a little perspective on our costs. About $73 million of the $85 million relates to financial institutions, $5 million relates to private pension plans, and about $4.7 million to the Office of the Chief Actuary.
As I said, we charge back virtually all of our costs to the financial institutions and pension plans or to other government departments. For financial institutions, for a large bank or an insurer, our charges would amount to about $4 million to $5 million a year, depending on the size of the institution. For a smaller or middle-sized depositing institution, we would charge back about $100,000 a year.
Our costs on a main estimates basis rose approximately 1% between 2005-06 and 2006-07. That's largely because of a variety of re-engineering initiatives we put in place to look at how we were doing our basic supervisory activities and other activities, and to keep our costs under control.
It is planned that our costs on a main estimates basis will rise in future at around 4% a year, though the increase will be faster in the pension area where we're adding resources because of the deteriorating condition in that area. They will be less than that in the other areas. That increase is basically reflective of normal inflationary growth for human resource costs and some ongoing investments in enabling technology.
Some of the increase is also due to additional resources we've put into anti-money laundering and anti-terrorism financing. Our planned staff complement is about 460 employees, and this is relatively static, though we cut it back between 2005-06 and 2006-07 as part of our re-engineering exercise.
Our priorities in the coming year include contributing to ongoing international and domestic efforts to strengthen capital rules, continuing to monitor and take action vis-à-vis the state of federally regulated pension plans, and increasing attention, as I've said, to anti-money laundering and counterterrorism financing issues. That's really in support of efforts being led by other departments--FINTRAC, the RCMP, and so on.
We report publicly on our website, and provide extensive information on aspects of our performance measures, including confidential surveys we undertake of the people we deal with, regulate, and supervise.
While we operate largely behind the scenes, I feel the high-quality work we do is acknowledged every time Canadians put their trust in a federally regulated institution or pension plan.
I look forward to your questions.