Despite not finding the same market manipulation issues as have been discovered with other financial benchmarks, such as LIBOR, Canadian regulators are planning new oversight for Canadian Dealer Offered Rate (CDOR).

The Office of the Superintendent of Financial Institutions (OSFI) announced today that a group of Canadian regulators is developing an “enhanced oversight framework” for the domestic benchmark rate.

OSFI notes that Canadian firms haven’t been named among the firms involved with the manipulation of LIBOR, and that a review of CDOR published by the Investment Industry Regulatory Organization of Canada (IIROC) last year pointed out an important distinction between LIBOR and CDOR that means that the Canadian rate may not be as vulnerable to some of the same issues. Given the differences between the two benchmark rates, “certain issues that have been identified regarding LIBOR do not apply to the same extent in the case of CDOR,” it says.

Nevertheless, the group of regulators known as the Canadian Heads of Regulatory Agencies — which is comprised of OSFI, the Bank of Canada, the federal Department of Finance, the Ontario Securities Commission, the Autorité des marchés financiers, the Alberta Securities Commission, and the B.C. Securities Commission — is seeking to bolster the oversight of CDOR. OSFI notes that it will take responsibility for supervising the governance and risk controls surrounding CDOR submission processes, given that CDOR submission activities are now solely conducted from within major Canadian banks.

The framework will be informed by new international expectations for benchmark rates, adapted to the unique characteristics of CDOR, OSFI says. For example, the International Organization of Securities Commissions (IOSCO) published a new set of principles in July 2013, which aim to address the shortcomings in the processes used to determine some major benchmarks. The principles were endorsed by the Financial Stability Board in August 2013 and by the G20 leaders in September 2013.

“Since the global financial crisis, OSFI has increasingly worked with banks to raise the bar on corporate governance and risk management domestically to meet new international standards,” it says. “Consistent with this work, OSFI’s expectations of CDOR submitters will be principles-based and focused on their internal benchmark submission activities and processes. OSFI will set out its expectations for CDOR submitters over the course of 2014.”