Good evening. My name is Darren Hannah and I am the Acting Vice-President of Policy and
Operations with the Canadian Bankers Association. I am very pleased to be here today at the
Committee’s invitation to discuss the banking industry’s relationship with our prudential regulator,
the Office of the Superintendent of Financial Institutions. With me today are representatives from
some of the CBA’s member banks: Mr. Sean McGuckin, Executive Vice President and Chief
Financial Officer of Scotiabank; Mr. Kent Andrews, Senior Vice President of Regulatory Risk and
Risk Capital of TD Bank Group; and, Mr. Chris Elgar, Chief Risk Officer of Manulife Bank and Trust.
In addition, I am joined by colleague from the CBA, Debbie Crossman, Director of Financial Affairs.
The CBA works on behalf of 59 domestic banks, foreign bank subsidiaries and foreign bank
branches operating in Canada and their 275,000 employees.
The strong relationship that exists between the banking industry and OSFI has served Canada well.
This was demonstrated during the global financial crisis when Canada’s banks fared much better
than their counterparts in other jurisdictions. Canada is consistently recognized as having one of
the strongest banking systems in the world. In fact, Canada’s banks have been ranked by the
World Economic Forum as having the soundest banks in the world for six consecutive years. We
largely attribute this strong performance to two factors: first, the prudent manner in which Canadian
banks are managed; and second, the strong regulatory and supervisory framework for banking in
Canada. The CBA strongly supports OSFI’s work internationally, and in particular their efforts to
ensure that banks in other jurisdictions are subject to the same level of high quality regulation and
supervision as Canadian banks.
The Canadian banking industry is one of the most heavily regulated and supervised sectors of the
economy. For example, Canadian banks are required to meet stringent OSFI guidelines in a wide
range of areas, such as capital, liquidity, leverage, corporate governance, accounting, and stress
testing. Some of these guidelines are quite extensive; for example, OSFI’s capital adequacy
requirements guideline totals several hundred pages. However, while there is a significant cost to
ensuring that banks are compliant with OSFI’s guidance, the CBA and its member banks recognize
the importance of effective and appropriate banking supervision given the banking industry’s critical
role in the economy and our extensive efforts to manage risk throughout the system.
It is important that the banking prudential regulator have adequate resources in place to understand
risks and set out appropriate rules and guidelines. In this regard, OSFI has been very clear with the
banking industry about its commitment to continually increase and improve its core competencies.
This does not mean, however, that we are unconcerned with the volume of regulation. As we have
stated publicly on numerous occasions, the overall complexity of compliance has increased
significantly in recent years as the quantity of regulation has expanded and we must ensure that the
right balance is struck to ensure competition and innovation in banking continues to be encouraged.
In Canada, unlike in some other jurisdictions, banks are fortunate in that they deal with only one
prudential regulator – OSFI – which simplifies the regulatory process. The CBA and its members
deal with OSFI on a regular basis. Banks’ interactions with OSFI are wide-ranging and can include
responding to OSFI requests for data and information, performing self-assessments of their
compliance with specific legislation or guidance, and facilitating OSFI’s reviews of certain business
lines to identify potential deficiencies in the way banks are managing risk.
OSFI consults directly with the banks as well as publicly on any significant changes it is proposing
to make to its guidelines or other requirements. The CBA believes that these consultations
contribute to transparency in the rule-making process and result in better outcomes for all. By
maintaining such an active dialogue, OSFI and the banking industry are able to cooperate to ensure
that proposals will work in practice and to avoid any unintended consequences. Consistent with its
mandate, OSFI monitors and evaluates system-wide events or issues that could negatively impact
the banking sector and stands ready to update its guidance accordingly.
The Committee may be interested to know that in the fall of 2012, The Strategic Counsel, an
independent research firm, conducted a consultation on OSFI’s behalf with deposit-taking
institutions, to explore perceptions of OSFI’s performance in the discharge of a number of key
elements of its mandate. The consultation comprised a series of confidential one-on-one interviews
with executives and professionals representing a cross-section of the deposit-taking institutions
regulated by OSFI. The consultation findings concluded that overall impressions of OSFI are
positive in most areas and that OSFI is perceived as highly effective in monitoring and supervising
deposit-taking institutions. The report containing these findings can be found on OSFI’s website.
The CBA and its members continue to work hard to maintain and strengthen their relationship with
OSFI, which we believe is a key component to ensuring the continued success of the Canadian
banking industry. We would like to once again thank the Committee for the opportunity to answer
questions regarding the relationship of the CBA and its member banks with OSFI.
We look forward to your questions. Thank you.