Mr. Speaker, please be advised that the Office of the Superintendent of Financial Institutions, OSFI, is an independent, arm’s length agency of the Government of Canada that was established to prudentially regulate and supervise federal financial institutions and private pension plans, in order to contribute to public confidence in the Canadian financial system.
OSFI was established on July 2, 1987, by the Office of the Superintendent of Financial Institutions Act, OSFI Act. Under the OSFI Act, the superintendent is solely responsible for exercising the authorities provided by various federal financial and pension legislation. The superintendent is required to report to the Minister of Finance from time to time on the administration of the financial institutions legislation.
With regard to a) Pursuant to the Insurance Companies Act, federally regulated life insurance companies are required to maintain adequate capital in relation to their operations. The minimum continuing capital and surplus requirements, MCCSR, for life insurance companies, established by OSFI, sets out the framework within which the superintendent assesses whether life insurance companies maintain adequate capital.
Prior to the October 2008 changes to the insurance companies’ capital requirements for segregated fund guarantees, OSFI initiated a process to review and update the industry’s capital adequacy rules. However, significant developments in global financial markets, in particular, extreme volatility in international stock markets, hastened that review.
The October 2008 revisions to insurance companies’ segregated fund guarantee MCCSR rules and its accompanying letter can be found online at: www.osfi-bsif.gc.ca/app/DocRepository/1/eng/guidelines/capital/guidelines/Revisions_Seg_Fund_MCCSR_Guid_e.pdf (MCCSR Revisions) and www.osfi-bsif.gc.ca/app/DocRepository/1/eng/guidelines/capital/guidelines/Revisions_Seg_Fund_MCCSR_Guid_LET2_e.pdf (Accompanying Letter).
With regard to b) As stated in the aforementioned accompanying letter from OSFI’s Robert Hanna, Assistant Superintendent – Regulation Sector: “These revisions seek to reduce volatility in capital requirements, to ensure that appropriate capital is held in respect of longer term payment obligations and shorter term payment obligations and to increase capital as payment dates become more proximate”.
With regard to c) With respect to OSFI’s power to regulate compensation and bonuses, OSFI has a supervisory mandate to ensure that banks have in place effective governance practices. In exercising that mandate, OSFI has the ability to require that a bank’s remuneration policies and practices do not expose the bank to undue risk, consistent with the financial stability board’s principles for sound compensation practices.
If OSFI were to identify a deficiency in a bank’s remuneration policies or practices, OSFI could take a number of measures pursuant to its supervisory authority, including as an initial measure, informing the bank of the need for corrective action.
In addition, please be advised the Government of Canada is committed to implementing the financial stability board, FSB, principles and implementation standards on sound compensation practices and has written to large banks and insurance companies outlining the expectation that they adopt the FSB principles and to ensure compensation practices are aligned. Following the G20 leaders’ commitment in Pittsburgh in September 2009 to reform compensation practices to support financial stability, the FSB has undertaken a review of implementation by jurisdictions and will propose additional measures as required. The review was published on March 30, 2010 (for more information, please visit: www.financialstabilityboard.org/list/fsb_publications/index.htm).
With regard to d) With respect to the lobbying activities of Manulife Financial and then President and Chief Executive Officer, Mr. Dominic D'Alessandro, please visit: https://ocl-cal.gc.ca/app/secure/orl/lrrs/do/_ls70_ls75_ls62_ls6c_ls69_ls63_ls53_ls75_ls6d_ls6d_ls61_ls72_ls79?_ls6c_ls61_ls6e_ls67_ls75_ls61_ls67_ls65=_ls65_ls6e_ls5f_ls43_ls41&_ls72_ls65_ls67_ls44_ls65_ls63=540062&_ls73_ls65_ls61_ls72_ls63_ls68_ls50_ls61_ls67_ls65=publicBasicSearch&_ls73_ls4d_ls64_ls4b_ls79=1273704363812&_STRTG3=tr.