The Office of the Superintendent of Financial Institutions has published a report setting out its priorities for the next couple of years, highlighting capital adequacy issues and the transition to international accounting standards among its top jobs.

In the report published Thursday, OSFI says that it will continue to focus on key areas such as capital adequacy, liquidity, and stress testing. In the coming year, it expects to review: Home Equity Lines of Credit (HELOC) and Alt-A mortgages (focusing on U.S. exposures), liquidity (specifically banks’ response to enhanced international expectations), and collateral management practices.

“The adequacy of capital maintained by financial institutions is a key priority,” it notes. “Capital provides a critical cushion for financial institutions which is always important, but especially during difficult economic times.”

For the 2009-2012 planning period, OSFI says it will focus on post implementation issues associated with the Basel II Capital Accord. “Policy work in this area will examine the target capital policy for risk ratios, modifications based on lessons learned to international capital rules and floors based on Basel II use and experience,” it says.

In the insurance sector, OSFI says that it will continue its work with the Minimum Continuing Capital and Surplus Requirement Advisory Committee for life insurance companies and has started work on the Minimum Capital Test Advisory Committee for the property and casualty insurance industry. “These initiatives are to develop and reach agreement on more risk sensitive measurement techniques and more forward looking risk management techniques,” it says.

Another key priority is OSFI’s work regarding the transition to International Financial Reporting Standards, it says, which is due to take effect 2011. In 2009-2010, OSFI will issue its draft positions on policy, process and reporting changes to industry for formal consultation. OSFI’s objective is to issue final guidelines, advisories and reporting returns to industry by mid-2010. After that, the focus will shift to system development and implementation of the changes.

OSFI says that financial market turmoil has led to an unprecedented level of international regulatory work, and it will continue to contribute to this work via various groups such as the Financial Stability Forum, the Basel Committee on Banking Supervision, and the International Association of Insurance Supervisors, as well as through membership in the Senior Supervisors Group.

The regulator says that total gross expenditures in 2008-2009 of $95.9 million are forecasted to increase by 11.9% from the previous year, due primarily to the increase in human resources and the full-year impact in 2008-2009 of employees hired during 2007-2008, normal inflationary and merit adjustments and continued annual investments in enabling technology and information technology infrastructure. Total gross expenditures in 2009-2010 of $100.0 million are planned to increase by 4.3%, in 2010-2011 and 2011-2012, OSFI’s total gross expenditures are planned to increase by 3.1% and 2.8%, respectively.

IE