Economic slowdowns and financial market weakness rank as among the greatest general risks facing federally regulated financial institutions and private pension plans, the Office of the Superintendent of Financial Institutions said Thursday.

“Historically, problems in financial institutions often lag behind economic recovery,” OSFI superintendent Nick Le Pan said in a message in the group’s report on plans and priorities for 2004-2005 to 2006-2007.

“Therefore a number of problem financial institutions remain on OSFI’s watch list. There are also a number of private pension plans with material deficits and financial weakness in the sponsoring organizations that are going to continue to require considerable focus to resolve…

“It will be a continuing priority for OSFI to effectively identify both current and future risks faced by the financial institutions and private pension plans that it regulates.”

OSFI also said its antiterrorism and anti-money laundering activities have increased significantly in the past few years. It says it will continue to focus on the integrity of institution control systems in this area.

Another challenge will be during the next three years will be the implementation of the new Basel Capital Accord. Selective changes in capital rules for insurers are also likely, it notes, and OSFI will monitor the impact of the recently introduced new capital rules for the property and casualty industry. Changes in accounting rules may also necessitate alterations in OSFI’s capital rules.

OSFI is also enhancing its focus on governance at the institutions it regulates and is contemplating guidance in the area of reputational risk management.

It will also focus on refining business processes, technological capabilities, and the development of its human resources. “OSFI has made strides in addressing its accountabilities. There are opportunities for improvement, and OSFI will continue to evolve its accountability,” it says.

Le Pan said the 2004 budget indicates that the government wishes to explore ways of improving the regulatory framework. It is focusing on how best to address any overlap in prudential, administrative and corporate services functions that may exist between OSFI and the deposit insurer, CDIC.