OSFI has released a report outlining its plans and priorities for the next three years.

The major external risks it foresees include increased complexity in the financial industry, coupled with the competitive nature of global markets, presents challenges to regulators; accounting rules; Basel II; financial crime; and, pension plan solvency.

“The growing participation of Canadian financial institutions in foreign markets challenges OSFI’s ability to implement an effective consolidated supervisory framework. Increased risk is evident in several areas, including reputation risk associated with the use of complex products in both the banking and insurance industries,” it notes.

Also, it stresses that it needs to be better positioned to understand the impact of, and address the potential implementation challenges of, evolving accounting and capital regimes.

Financial crime and terrorist financing are receiving greater attention by regulators than was the case a few years ago, OSFI notes. “Additional requirements are likely to be put in place for Canada to remain compliant with international norms,” it says.

OSFI’s reviews also indicate a need for further improvement in institutions’ practices. “OSFI is increasing its resources in assessing financial institutions’ ability to detect and deter money laundering and terrorist financing,” it adds.

As for pension issues, OSFI says that more resources will be allocated to the operation of an effective system for pension supervision, including the need for intervention in dealing with problem plans. “Work will include active participation in government policy development that may address issues such as funding, treatment of surplus and other concerns related to defined benefit plans,” it says.

OSFI also indicates that it will clarify overall pension regulation objectives in areas such as policy development and compliance testing, and develop more detailed policies and procedures for private pension plan regulatory processes. It will deal with the backlog in pensions approvals, and will develop processes to be used in clarifying complex requests/approvals.