“Persistent sustained action by plan sponsors is required to reduce actual or potential problems in pension plans,” he said in a speech to the Economic Club of Toronto.

About half the defined benefit plans OSFI regulates have solvency deficits. The good news is that almost all have started actively funding their deficits, he reported.

“We have seen an overall trend that the solvency position of defined benefit plans, taken as whole, has stabilized during the year. I regard the situation as manageable but tenuous. The improvement to date is highly dependent on asset returns and the path of interest rates. Recent declines in long-term interest rates, by increasing the current value of liabilities, are adding to solvency deficits.”

Le Pan also spoke out against the danger of regulators issuing too many prescriptive rules.

“As a regulator, over the past few years we have tried very hard to resist the temptation to put in place detailed new rules,” he said.

“In fact I worry that too many detailed new rules can be counter-productive. They risk becoming a checklist and then their benefit is, at best, greatly reduced.”

Le Pan explained, “Many of the problems we have seen have been failures of behaviours by key persons responsible, or by key control functions or governance mechanisms. So OSFI’s approach, for example in the key area of corporate governance, has been to emphasize the behaviours we think are essential for governance to be effective – and what needs to be in place to support effective governance.”

That said, Le Pan noted that both banks and life insurers are increasingly seeing the framework of rules being set internationally, through initiatives such as Basel II. More progress is needed to put in place a modern system of accounting rules and rules related to insurers solvency and risk management, he said.