The Office of the Superintendent of Financial Institutions has released a new guideline on corporate governance.

In a letter to federally regulated institutions, OSFI superintendent, Nick Le Pan, notes that the document represents the culmination of OSFI’s comprehensive review of its approach to assessing the effectiveness of corporate governance practices in federally regulated financial institutions.

As part of its supervisory process, OSFI is increasing the focus on assessing governance in the institutions that it supervises. The release of this guideline also reflects OSFI’s desire to be more transparent concerning its expectations of governance structures.

The guideline is focussed on issues of particular relevance for financial institutions. It applies to all federally regulated financial institutions, other than branch operations of foreign banks and foreign insurance companies.

The guideline does not mandate a certain board structure. It allows that certain structures may encourage independence, but it notes, “OSFI does not view any one structure as guaranteeing independence. What matters is that a particular structure and the board’s behaviour are effective, taking into account the particular circumstances of the financial institution. Independence is normally a matter of the board demonstrating its ability to act independently of management when appropriate and includes such practices as having regular meetings without management present.”

The guideline also addresses several other issues including: risk management; governance of subsidiaries; and the relationship between the board and regulators.