In an effort to enhance oversight of Québec’s financial sector, the Autorité des marchés financiers (AMF) is promising a more proactive, risk-sensitive approach to prudential regulation.
The AMF announced on Thursday that it has updated its supervisory framework for provincially-regulated financial institutions (banking institutions, cooperatives and insurers), with a view to being more responsive to emerging risks and more communicative with industry firms.
In a notice, the regulator said its revised approach is designed to be “dynamic, forward-looking and adaptable” to the fast-evolving financial sector as well as the shifting risk landscape.
Among other things, the regulator said it has formalized its monitoring of emerging practices, trends and risks on an ongoing basis; that it has improved its risk-based approach to assessing institutional resilience; and that it is specifically adopting an assessment of “commercial practice risk for clients” to more clearly identify risks to clients, alongside the prudential risks to firms themselves.
The introduction of a formal assessment of client impacts aims to ensure that clients are being treated fairly by industry firms and that products or practices that may lead to unfair treatment are identified quickly as part of its supervisory work.
“The adjustments we have made to our practices will enable us to more effectively coordinate our supervisory activities based on significant and rapid changes in risks,” said Patrick Déry, superintendent of financial institutions with the AMF, in a release.
The regulator also indicated that its updated approach — which is being revised “to adjust for the accelerated pace of change in the financial sector” — is intended to enable it to intervene more quickly when needed.
At the same time, the regulator indicated that it’s aiming to be more transparent, and predictable, to the industry.
In particular, it’s seeking to more clearly communicate with the senior management and boards of financial institutions on emerging risks and industry practices that need improvement.
“Institutions are operating in an environment of unprecedented uncertainty, and our update to the supervisory framework focuses on the resilience of industry members and the protection of consumers doing business with them,” Déry added.