Federal financial regulators say they want a chance to weigh in on potential senior management changes and board candidates at the big banks and insurance companies, but stress that they don’t intend to exercise control over these roles.
The Office of the Superintendent of Financial Institutions (OSFI) issued the final version of an advisory published earlier this year, which outlines the process for notifying the regulator about potential changes in the boardroom and executive suite at the major banks, life insurers, and other federally regulated firms.
In the final version, OSFI aims to dispel the notion that it intends to vet planned management changes or board appointments. It stresses that these decisions remain with the firms themselves, and it aims to address what it calls the “misconception” that OSFI’s approval or vetting would be required. While some jurisdictions have adopted a formal vetting process, OSFI says that it believes an early notification requirement, and the opportunity to comment that provides, is appropriate for Canada.
Indeed, it stresses that the requirement to alert the regulator to potential changes allows it to communicate concerns or comments before an appointment or nomination is made. OSFI notes that in these discussions it will be primarily focused on a candidate’s risk awareness, but that it expects that firms will continue to make independent hiring decisions.
For large, complex firms, the advisory also provides that OSFI may request an introductory meeting with a new appointee to discuss the regulator’s expectations, and its interaction with the firm.
OSFI says that the advisory represents a continuation of its work to enhance corporate governance; and that it is consistent with recent international recommendations on governance, including a recent paper from the G30 that highlights the importance of regulators’ contributions to the due diligence process for banks that are making senior appointments or nominations.