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Section II – Analysis of Program Activities by Strategic Outcome

The following section describes OSFI's program activities and identifies the expected results, performance indicators and targets for each of them. This section also explains how OSFI plans on meeting the expected results and presents the financial and non-financial resources that will be dedicated to each program activity.

2.1 Strategic Outcome One – A safe and sound Canadian financial system.

2.1.1 Program Activity: Regulation and Supervision of Federally Regulated Financial Institutions

Human Resources (FTEs) and Planned Spending ($ millions)
2010-11		2011-12		2012-13
FTEs	Planned Spending	FTEs	Planned Spending	FTEs	Planned Spending
328	54.6	330	56.5	330	58.5

Program Activity Expected Results	Performance Indicators	Targets
Protect depositors and policy holders while recognizing that all failures cannot be prevented.	Percentage of estimated recoveries on failed institutions (amount recovered per dollar of claim)	90%
Accurate risk assessments.	Percentage of knowledgeable observers5 who agree that their institution's Composite Risk Rating is appropriate.	70%
Timely and effective intervention and feedback.	Time to issue Supervisory Letter (within prescribed target days)	80% of letters are issued within 45 days
Regulations, guidance and other rules that balance prudential considerations and the need to compete.	Percentage of knowledgeable observers5 who rate OSFI as good or very good at developing regulations, guidelines and other rules that strike an appropriate balance between prudential considerations and the need for institutions to compete.	50%
Regulations, guidance and other rules which are clear and scrutinized by industry.	Percentage of knowledgeable observers5 who rate OSFI as good or very good at developing regulations, guidelines and other rules for industry that are clear and easy to understand. AND/OR Percentage of knowledgeable observers5 who rate OSFI as good or very good at consulting with industry on the development of regulations, guidelines and other rules.	75% 60%
Regulatory approval result in prudentially sound decisions that are transparent.	Percentage of knowledgeable observers5 who understand somewhat or very well the basis upon which OSFI makes its decisions as part of the approval process.	85%
Regulatory approvals which are timely.	Percentage of completed applications for regulatory approvals that are processed within established performance standards.	90%

⁵ Senior Executives and professionals who act on behalf of federally regulated financial institutions.

Program Activity Summary

This program involves regulating and supervising FRFIs to determine whether they are in sound financial condition and are complying with their governing law and supervisory requirements; monitoring the financial and economic environment to identify issues that may impact these institutions negatively; and intervening in a timely manner to protect depositors and policyholders from undue loss, while recognizing that management and boards of directors are ultimately responsible, and that financial institutions can fail.

Costs for this program are recovered through base assessments and user fees and charges paid by the FRFIs covered under the Bank Act, Trust and Loan Companies Act, Insurance Companies Act and Cooperative Credit Associations Act. OSFI also receives revenues for cost-recovered services to provinces, for which it provides supervision of their institutions on a fee for service basis.

This program has three sub-activities:

1. Risk Assessment and Intervention: This program involves the administration and application of an effective supervisory process to assess the safety and soundness of regulated financial institutions by evaluating an institution's risk profile, financial condition, risk management processes, and compliance with applicable laws and regulations. This program includes activities to monitor and supervise financial institutions; monitor the financial and economic environment to identify emerging issues; and intervene by exercising supervisory powers to take, or require management or boards to take, necessary corrective measures in a timely manner to protect depositors and policy holders, while recognizing that all failures cannot be prevented.
2. Regulation and Guidance: This program involves advancing and administering a regulatory framework of rules and guidance that promotes the adoption by regulated financial institutions of sound risk management practices, policies and procedures designed to plan, direct and control the impact on the institution of risks arising from its operations. This program encompasses the issuance of regulations and guidance, input into federal legislation and regulations affecting financial institutions; contributions to accounting, auditing and actuarial standards; and involvement in a number of international regulatory activities.
3. Approvals and Precedents: Federally regulated financial institutions are required to seek regulatory approval for certain types of transactions. This program: evaluates and processes applications for regulatory consent; establishes positions on the interpretation and application of the federal financial institutions legislation, regulations and guidance; identifies precedential transactions that may raise policy or precedent-setting issues and develops recommendations that recognize the need to allow institutions to compete effectively while undertaking reasonable risks that do not unduly impact OSFI's primary stakeholders, the policyholders and depositors of FRFIs.

Planning Highlights

In order to achieve the expected result, OSFI plans to undertake the following activities:

• Continue to:
  • improve our ability to identify, monitor and report on emerging risks including system-wide risks that may have a material impact on the Canadian financial system, via enhanced international and domestic monitoring, and research and intelligence gathering;
  • update and implement changes to the Supervisory Framework;
  • perform selected comparative reviews of FRFIs in key risk areas.
• Implement enhanced liquidity assessment and monitoring practices.
• Internationally, continue to participate in discussions (such as the FSB, the BCBS, the International Association of Insurance Supervisors, and Senior Supervisors Group) to identify and respond to the key issues arising from global financial events, including future changes to regulatory approaches and requirements, and to make recommendations for action.
• Domestically, continue work with FISC partners and the regulated industries on similar issues in the Canadian context.
• Maintain strong communications on, and continue to promote improved risk management practices including: stress testing methodologies, executive compensation practices, liquidity management, and corporate governance in institutions, in order to strengthen individual FRFI preparedness and overall market resilience.
• Continue to:
  • actively participate in international fora (BCBS, G20, and FSB) to contribute to the development of internationally agreed bank capital standards;
  • review and improve domestic regulatory capital requirements and assessment practices through steps such as stress testing and implementing guidance agreed at the international level while taking into account identified emerging risks;
  • enhance risk sensitivity of capital requirements in the insurance sector.
  • ensure that capital adequacy rules are interpreted and operationalized effectively and consistently.
• Implement the move to IFRS by assessing the impact on FRFIs and pension plans, and by addressing implications to OSFI's prudential regime, regulatory policies, and regulatory returns.

Benefits for Canadians

A properly functioning financial system, in which consumers and others (inside and outside Canada) have a high degree of confidence, makes a material contribution to Canada's economic performance. OSFI is the primary regulator and supervisor of all federally registered financial institutions, numbering about 450. The achievement of OSFI's strategic outcomes, which are shared by partners within government and the private sector, provides an essential foundation for a productive and competitive economy.

OSFI supports the government's priority for a safe and secure world by contributing to the fight against terrorism financing and money laundering. OSFI's focus relates to prudential matters and, on behalf of Financial Transactions Reports Analysis Centre of Canada (FINTRAC), the review of the operation of financial institution programs to comply with legislative anti-money laundering / anti-terrorism financing requirements.

2.1.2 Program Activity: Regulation and Supervision of Federally Regulated Private Pension Plans

Human Resources (FTEs) and Planned Spending ($ millions)
2010-11		2011-12		2012-13
FTEs	Planned Spending	FTEs	Planned Spending	FTEs	Planned Spending
27	5.3	27	5.3	27	5.1

Program Activity Expected Results	Performance Indicators	Targets
Protect the financial interests of federally regulated private pension plan members and beneficiaries.	Percentage of estimated recoveries on pension plans that have terminated under-funded.	85%
Regulations, guidelines and other rules which are clear and balanced.	Percentage of knowledgeable observers6 who rate OSFI as being good or very good at developing regulations, guidelines and other rules that are clear and easy to understand. AND/OR Percentage of knowledgeable observers6 who rate OSFI as being good or very good at developing regulations, guidelines and other rules that strike an appropriate balance between interests of plan sponsors and plan members.	75% 50%
Regulatory approvals which are timely and transparent.	Percentage of knowledgeable observers6 who rate the transparency, that is, the rationale for OSFI's recommendations and decisions, of the Pensions Approvals process, as good or very good. AND/OR Percentage of completed applications for regulatory approvals that are processed within established benchmarks.	60% 90%

⁶ Plan Administrators and professionals who act on behalf of pension plans.

Program Activity Summary

This program involves regulating and supervising federally regulated private pension plans to determine whether they are meeting minimum plan funding requirements and are complying with their governing law and supervisory requirements. This program provides risk assessments of pension plans covering employees in federally regulated areas of employment; timely and effective intervention and feedback to protect the financial interests of plan members and beneficiaries from undue loss, while recognizing that plan administrators are ultimately responsible, and that plans can fail; a balanced relevant regulatory framework; and a prudentially effective and responsive approvals process. This program incorporates risk assessment and intervention, regulation and guidance, and approvals and precedents related to federally regulated private pension plans under the Pension Benefits Standards Act, 1985. The costs for this program are recovered from pension plan fees based on the number of members in each federally regulated pension plan.

Planning Highlights

In order to achieve the expected result, OSFI plans to undertake the following activities:

• Develop and implement systems to support the pensions risk assessment framework published in 2009;
• Assess the need to review OSFI guidance and reporting requirements for pension plans in light of changes to Canadian Generally Accepted Accounting Principles (GAAP) to reflect aspects of IFRS;
• Update and enhance guidance for pension plans to support planned amendments to the legislation and regulations and new supervisory priorities;⁷
• Refine the monitoring of risks facing pension plans, including the impact of rule changes, and adjust supervisory processes as warranted.

⁷ This includes guidance on stress testing, investments, disclosure guideline as a result of changes to the Pension Benefits Standards Act, 1985.

Benefits for Canadians

OSFI supports the government's priority for income security for Canadians. OSFI supervises some 1,379 federally regulated private pension plans in Canada, which cover 612,000 active members as at March 31, 2009. OSFI works to promote responsible pension plan governance and actuarial practices. OSFI's actions and decisions affect plan members as well as the sponsors and administrators of the plans.

2.1.3 Program Activity: International Assistance

Human Resources (FTEs) and Planned Spending ($ millions)
2010-11		2011-12		2012-13
FTEs	Planned Spending	FTEs	Planned Spending	FTEs	Planned Spending
5	1.6	5	1.7	5	1.8

Program Activity Expected Results	Performance Indicators	Targets
Emerging market economies are more informed about current approaches to regulatory and supervisory systems, and deploy them to the extent possible.	Percentage of respondents8 that rate the assistance / presentations provided as relevant to their work.	80%
Technical assistance (e.g., workshops, advice, on-site needs assessments)	Percentage of respondents8 who rate OSFI trainers as competent or highly competent.	90%

⁸ Foreign regulators who receive technical assistance from OSFI's International Advisory Group.

Program Activity Summary

This program incorporates activities related to providing assistance to selected developing and emerging market economies to improve their supervisory systems in line with international banking and insurance supervisory standards, thereby enhancing the stability of the global financial system. In order to achieve efficiency and economy in program delivery and training of supervisors from many different jurisdictions, this program also collaborates with a number of regional banking and insurance associations and other technical assistance providers such as the Financial Stability Institute. The costs for this program are recovered via Memoranda of Understanding between the Office of the Superintendent of Financial Institutions and the Canadian International Development Agency.

Planning Highlights

In order to achieve the expected result, OSFI plans to undertake the following activities:

• Strategically concentrate its activities on a small number of target / partner countries.
  

Benefits for Canadians

OSFI supports the government's priority for a safe and secure world through international cooperation. Canada and other G-7 governments recognize that upgrading the supervisory capacity of emerging market supervisory authorities can enhance the stability of the global financial system. Canada plays an important role in this regard, in part through OSFI's technical assistance program, which helps selected emerging market economies to improve the supervisory systems for their financial institutions in line with international banking and insurance supervisory standards.

2.2 Strategic Outcome Two – A financially sound and sustainable Canadian public retirement income system.

2.2.1 Program Activity: Actuarial Valuation and Advisory Services

Human Resources (FTEs) and Planned Spending ($ millions)
2010-11		2011-12		2012-13
FTEs	Planned Spending	FTEs	Planned Spending	FTEs	Planned Spending
31	4.3	31	4.2	31	4.4

Program Activity Expected Results	Performance Indicators	Targets
Stewards of Canada's public retirement income system are provided with independent, accurate, high quality and timely professional actuarial services and advice.	Adequacy of professional experience of the Chief Actuary and his staff. AND/OR Compliance with Canadian and international professional standards.	Unanimous agreement amongst peers
Accurate and high quality actuarial valuations inform CPP and OAS stakeholders and Canadians of the current and projected financial status of the Plan and Program.	Reviews are comprehensive (methods, assumptions, analysis) AND/OR Percentage of the recommendations within the scope and influence of the OCA that are implemented before the next peer review.	Unanimous agreement amongst peers 80%
CPP and OAS Triennial Actuarial Reports	Timeliness of tabling in Parliament of Reports on Canada Pension Plans & Old Age Security.	100% by the deadline
Accurate and high quality actuarial valuations of Public Pension and Insurance Plans provided to departments to inform design, funding and administration of plans.	Reviews are comprehensive (methods, assumptions, analysis). AND/OR Actuarial opinion is appropriate.	Unanimous agreement amongst peers
Public Sector Triennial Actuarial Reports	Timeliness of tabling in Parliament of Reports on Public Pension Plans.	100% by the deadline
Accurate and high quality actuarial valuations of the Canada Student Loans Program inform the Department of Human Resources and Skills Development Canada (HRSDC) of the future costs and provision rates of the program.	Actuarial valuations of the Canada Student Loans Program are comprehensive (accurate, high quality) and informative of future costs and provision rates of the program.	Annual renewal of the MOU with HRSDC
Actuarial Report on the Canada Student Loans Program	Timeliness of tabling in Parliament of Reports on Canada Student Loans.	100% by the deadline set by HRSDC

Program Activity Summary

The federal government and the provinces, through the Canada Pension Plan (CPP), public sector pension arrangements and other social programs have made commitments to Canadians and have taken on emanated responsibility for the financing of these commitments. Some are long-term and it is important that decision-makers, Parliamentarians and the public understand these and the inherent risks. This program plays a vital and independent role in this process. It provides checks and balances on the future costs of the different pension plans under its responsibilities.

This program provides a range of actuarial services, under legislation, to the CPP and some federal government departments. It conducts statutory actuarial valuations of the CPP, Old Age Security (OAS) and Canada Student Loans programs, and pension and benefits plans covering the Federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police (RCMP), federally appointed judges, and Members of Parliament.

The Office of the Chief Actuary (OCA) is funded by fees charged for its actuarial valuation and advisory services and by an annual parliamentary appropriation.

This program has three sub-activities:

1. Services to the CPP and OAS Program: This program involves the conduct of statutory actuarial valuations of the CPP and OAS Program. These valuations estimate the financial status of these plans and programs as required by legislation. This program estimates long-term expenditures, revenues and current liabilities of the CPP and estimates long-term future expenditures for OAS programs. Pursuant to the Canada Pension Plan Act and the Public Pensions Reporting Act, the OCA prepares statutory triennial actuarial reports on the financial status of these programs, as required by legislation.
2. Services to Public Sector Pension and Insurance Programs: This program involves the conduct of statutory actuarial valuations of various federal public sector employee pension and insurance plans. These valuations estimate the financial status of these plans as required by legislation. Pursuant to the Public Pensions Reporting Act, this program involves preparing statutory triennial actuarial reports on the financial status of federal public sector employee pension and insurance plans covering the federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police, the federally appointed judges and Members of Parliament. This program supports plan members, thereby serving the public interest, by ensuring good governance of the plan, appropriate disclosure in the actuarial reports and contributing to the overall accountability of the plan sponsor to members. This program also involves the provision of sound actuarial advice that assists different government departments in the design, funding and administration of these plans. As part of this program, the Chief Actuary submits the actuarial reports to the President of Treasury Board.
3. Services to the Canada Student Loans Program (CSLP): Pursuant to the Student Financial Assistance Act, as amended by the Budget Implementation Act, 2009, this program involves the conduct of statutory actuarial valuations of the CSLP. The program also involves the preparation of a statutory actuarial report of the CSLP by evaluating the portfolio of loans and the long-term costs of the program. As part of this program, the Chief Actuary submits the actuarial report to the minister of Human Resources and Skills Development.
   

Planning Highlights

In order to achieve the expected result, OSFI plans to undertake the following activities:

• Tabling the Actuarial Report for the CSLP, CPP, Judges, Members of Parliament, and RCMP part IV.
  

Benefits for Canadians

Canada has set in place a public pensions system that is expected to be sustainable and affordable well into the future in the face of changing demographic conditions. While OSFI does not supervise public pensions, the OCA does do statutory actuarial reports on various public pension programs, to come to conclusions about sustainability under certain assumptions. In this way, the OCA provides appropriate checks and balances on the future costs of the different pension plans and social programs that fall under its responsibilities.

2.3 Program Activity: Internal Services

 

Program Activity: Internal Services

Human Resources (FTEs) and Planned Spending ($ millions)
2010-11		2011-12		2012-13
FTEs	Planned Spending	FTEs	Planned Spending	FTEs	Planned Spending
152	43.4	151	55.6	151	46.9

Program Activity Expected Results	Performance Indicators	Targets
OSFI's financial statements accurately reflect the financial position of OSFI.	An audit by the Office of the Auditor General attests that OSFI's financial statements present fairly, in all material respects, the financial position of OSFI at the year-end and the results of its operations and its cash flows for the year in accordance with GAAP.	N/A
OSFI maintains or improves its strong performance on its Results-based Management Accountability Framework, (MAF) as assessed by Treasury Board from time to time.	Treasury Board's next assessment of OSFI's MAF indicates equal or improved ratings, including in the three areas where, in the last assessment, Treasury Board suggested a need to focus.	N/A
Operational units within program support are efficient and effective, i.e. deliver services at reasonable cost and turn-around time relative to peers. AND Operational units are operating within applicable acts, policies and guidelines.	Treasury Board's audits of OSFI, in the scope of its government-wide Horizontal Audits, confirm no material findings for OSFI. AND Internal Audits of reviewed units find that controls are in place and units are operating within applicable acts, policies and guidelines, and/or identifies areas for action.	N/A
A stable, committed and skilled workforce.	Knowledgeable observers9 are of the view that OSFI staff knowledge is good or very good. AND/OR Voluntary turnover reports are satisfactory. AND/OR Employee Survey finds that OSFI employees are committed. AND/OR The consolidated mean score of the Employee Survey has increased since the last survey.	N/A
Multi-year Information and Technology Renewal (ITR) Program remains dynamic and evolves to accommodate OSFI's changing strategic directions, priorities and resource constraints.	ITR Program is implemented as per established timelines and targeted results are achieved.	N/A

⁹ Senior Executives, Plan Administrators, and professionals who act on behalf of federally regulated financial institutions and pension plans.

Program Activity Summary

OSFI's Internal Services program activity supports its two strategic outcomes. Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.

Planning Highlights

In order to achieve the expected result, OSFI plans to undertake the following activities:

• Identify changing human resources requirements to: ensure timely availability of qualified staff and the assignment of these resources based on identified risks and priority areas; implement strategic learning and development (training) plans;
• Implement the long-term strategies and related governance for Information Management and Information Technology necessary to support our evolving supervisory and regulatory activities;
• Implement the accommodation plan for OSFI's Toronto, Ontario office.

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