Federal Financial Institutions Legislative And Regulatory Reporter – September 2020 – Finance and Banking

Institution

Published

Title and Brief Summary

Status


Office of the Superintendent of Financial Institutions
(OSFI)

September 30, 2020

OSFI updates IFRS 17 implementation
timelines


The Office of the Superintendent of Financial Institutions
(OSFI) released three documents updating the timelines for Canadian
insurer’s implementation of International Financial Reporting
Standards – Insurance Contracts (IFRS 17).


Associated links


 


Office of the Superintendent of Financial Institutions
(OSFI)

September 17, 2020

2021 actuarial report on the employment insurance
premium rate


The 2021 report provides actuarial
forecasts and estimates for the purposes of sections 4, 66 and 69
of the Employment Insurance Act. The estimates are based on the
employment insurance (EI) provisions as of July 22, 2020. They also
take into account additional information received from Employment
and Social Development Canada on August 6, 2020, which was
announced by the government on August 20, 2020. This information
includes upcoming temporary measures aimed at facilitating access
to EI, as well as a confirmation of a premium rate freeze in 2021.
The estimates were not revised for the additional four week
extension of the Canada Emergency Response Benefit (including the
EI Emergency Response Benefit), which was recently announced on
August 20, 2020.

 


Bank of Canada

September 15, 2020

Bank of Canada announces changes to the amount of
Government of Canada Treasury Bills acquired at auction


In March, The Bank of Canada’s short-term liquidity programs
announced to improve market functioning are continuing to have
their intended effect. With significant improvements in short-term
funding conditions and, in particular, funding conditions in the
Government of Canada Treasury Bill market, the Bank is reducing its
current pace of acquisition of these securities.


Effective September 21, 2020, the Bank will reduce the amount it
purchases at auction from 20 per cent to 10 per cent of tendered
amounts. The Bank may adjust its purchase percentage further if
market conditions warrant.

Effective September 21, 2020


Bank of Canada

September 15, 2020

Bank of Canada announces changes to the Provincial
Money Market Purchase (PMMP) program


Likewise, with significant improvements in short-term funding
conditions and, in particular, improvements in the short-term
provincial borrowing market, the Bank is making amendments
to the PMMP program.


Effective September 21, 2020, the Bank will reduce the amount it
purchases from up to 20 per cent to 10 per cent of each accepted
offering of directly issued provincial money market securities with
terms to maturity of 12-months or less. The 10 per cent limit may
be adjusted if market conditions warrant.

Effective September 21, 2020


Office of the Superintendent of Financial Institutions
(OSFI)

September 15, 2020

OSFI launches consultation on technology risks in
the financial sector


OSFI is receiving comments and submissions on technology risks
and building resilience in the financial sector until December 15,
2020. Please send feedback to Tech.Paper@osfi-bsif.gc.ca.


On September 15, OSFI launched a three-month consultation with
the publication of the discussion paper, Developing financial sector resilience in a digital
world
. The paper focuses on risks arising from rapid
technological advancement and digitalization, as these trends
impact the stability of the Canadian financial sector.


Understanding the financial sector’s use of technology and
how technology risks are managed is central to this consultation.
OSFI’s discussion paper focuses on the risk areas of cyber
security, advanced analytics (artificial intelligence and machine
learning), as well as the use of third party services such as cloud
computing.


OSFI is seeking feedback from a wide range of stakeholders
including financial sector participants, technology experts, and
academics. Their input will help guide OSFI’s regulatory and
supervisory approaches to technology risks that meet our mandate of
protecting depositors, policyholders and private pension plan
beneficiaries while allowing institutions to compete and take
risks.

Submissions due on December 15, 2020


FATF

September 14, 2020

Virtual assets red flag indicators of money
laundering and terrorist financing


The newly released report from the Financial Action Task Force
(FATF), Virtual Assets – Red Flag Indicators of Money
Laundering and Terrorist Financing
, is informed by more than
100 case studies collected by members of the FATF Global Network.
The report highlights the most important red flag indicators that
could suggest criminal behaviour.


Key indicators in this report focus on:


  • Technological features that increase anonymity – such as the
    use of peer-to-peer exchanges websites, mixing or tumbling services
    or anonymity-enhanced cryptocurrencies;

  • Geographical risks – criminals can exploit countries with weak,
    or absent, national measures for virtual assets;

  • Transaction patterns – that are irregular, unusual or uncommon
    which can suggest criminal activity;

  • Transaction size – if the amount and frequency has no
    logical business explanation;

  • Sender or recipient profiles – unusual behaviour can suggest
    criminal activity; and

  • Source of funds or wealth – which can relate to criminal
    activity

This report helps virtual asset service
providers
, financial institutions, and designated non-financial
businesses and professions, as well as other reporting entities
detect and report suspicious transactions. It also provides useful
information for financial intelligence units, law enforcement
agencies, prosecutors and regulators to analyse suspicious
transaction reports or monitor compliance with anti-money
laundering and counter-terrorist financing controls.


This report complements the FATF guidance for a Risk-Based Approach to Virtual
Assets and Virtual Asset Service Providers
 from June
2019.


The guidelines explain:


  • How to understand the money laundering and terrorist financing
    risks of virtual assets;

  • How to license and register the sector;

  • Actions sectors need to take to know information about their
    customers,

  • How to store this information securely; and

  • How to detect and report suspicious transactions.

In Brief:


 


Bank of Canada

September 14, 2020

Debt management strategy consultations –
2021-2022


The Department of Finance and the Bank of Canada are seeking the
views of government securities distributors, institutional
investors, and other interested parties on issues related to the
design and operation of the Government of Canada’s domestic
debt program for 2021-2022 and beyond.


The Debt Management Strategy consultations will take place in
the fall of 2020. A summary of comments received from market
participants will be made available on the Bank of Canada’s
website concurrently with the release of the Debt Management Strategy for 2021-2022.

 


Office of the Superintendent of Financial Institutions
(OSFI)

September 11, 2020

OSFI updates its FAQs on COVID-19 related
regulatory measures


The Office of the Superintendent of Financial Institutions
(OSFI) has a series of Frequently Asked Questions
(FAQs)
 available for federally regulated financial
institutions and private pension plans about regulatory measures it
has taken to address issues stemming from COVID-19.


OSFI made updates to its published FAQs related to:


 


Office of the Superintendent of Financial Institutions
(OSFI)

September 11, 2020

Instruction Guide for the Preparation of Actuarial
Reports for Defined Benefit Pension Plans – Draft


A draft of the Revised Instruction Guide for the Preparation of
Actuarial Reports for Defined Benefit Pension Plans
 (the
Guide), along with an accompanying letter, was posted on the OSFI
website for a 90-day consultation period December 20, 2019. As a
result of the COVID-19 crisis, on March 13, 2020, OSFI suspended a
number of consultation initiatives and policy development work
related to new or revised guidance, including consultation on the
Guide. As indicated in the latest issue of the Pillar, OSFI has
gradually restarted policy development work.


The consultation period for the Guide has now resumed. Questions
about the Guide may be sent to Marc Sauvé, Senior Manager,
Actuarial in the Private Pension Plans Division, by email
at marc.sauve@osfi-bsif.gc.ca.

 


Office of the Superintendent of Financial Institutions
(OSFI)

September 10, 2020

Life Memorandum to the Appointed Actuary
2020


Each year, OSFI updates the Life Memorandum to the Appointed
Actuary (the Memorandum). This Memorandum describes the
requirements of OSFI or its Superintendent with respect to the
Appointed Actuary’s Report (AAR) specified in subsection 667(2)
of the Insurance Companies Act (ICA). It sets out the minimum
standards used in determining the acceptability of the AAR and
provides guidance for the Appointed Actuary preparing reports in
matters relating to presentation, level of detail and nature of the
discussions to be included.


Key changes are highlighted in a letter pertaining to the
release of the life memorandum, as well as a letter specific to property and casualty. For full
details, see The Life Memorandum to the Appointed Actuary
(2020)
.

 


Office of the Superintendent of Financial Institutions
(OSFI)

September 9, 2020

“2020 Annual Update” to the Manual of
Financial Reporting Forms and Instructions for Life Insurance
Companies and Fraternal Benefit Societies
.


Changes have been made to the Canadian Council of Insurance
Regulators (CCIR) regulatory forms and instructions.


The changes can be viewed on OSFI’s Web site at www.osfi-bsif.gc.ca. A
detailed summary of all changes can be found under Section VII of
the instructions.

 


International Association of Insurance Supervisors (IAIS)

September 7, 2020

Stock-take questionnaire on infrastructure and
strategic equity


As part of its work on the Insurance Capital Standard (ICS) over
the 2020-2024 Monitoring Period, the International Association of
Insurance Supervisors (IAIS) is exploring whether there should be a
differentiated capital treatment of certain eligible infrastructure
(both equity and debt) as well as strategic equity investments
within the ICS.


In that context, the IAIS is seeking input from the public
regarding quantitative and qualitative material and data sources
that could be used to support the aforementioned work. The survey
also provides an opportunity for stakeholders to share with the
IAIS their experience with respect to such investments.


If you are intending to participate in this survey,
please submit your response exclusively here before
December 7, 2020
.

Submissions due on December 7, 2020


Financial Stability Board (FSB)

September 7, 2020

Regulatory framework for haircuts on non-centrally cleared
securities financing transactions.


Transforming Shadow Banking into Resilient
Market-based Finance Regulatory framework for haircuts on
non-centrally cleared securities financing
transactions
 was originally published on November 12,
2015, however, the annexes were updated on July 19, 2019, November
25, 2019 and September 7, 2020.


This document sets out the finalized policy
recommendations
 in the framework for haircuts on certain
non-centrally cleared securities financing transactions (SFTs),
based on the public consultation findings. The framework aims to
address financial stability risks associated with SFTs. This work
was published in October 2014, and sets out numerical haircut
floors to apply to non-bank-to-non-bank SFTs and updates the
implementation dates of the FSB’s recommendations on SFTs.

There are various implementation dates that are ongoing or
already in force. For extended implementation dates for certain
recommendations, please see below.


Financial Stability Board (FSB)

September 7, 2020

FSB extends implementation timelines for
securities financing transactions


The Financial Stability Board (FSB) announced extensions to the implementation
timelines
 for minimum haircut standards for non-centrally
cleared securities financing transactions (SFTs), to ease
operational burdens on market participants and authorities, and
thereby assist them in focusing on priorities from the impact of
COVID-19.


SFTs such as securities lending and repurchase agreements play a
crucial role in supporting price discovery and secondary market
liquidity for a wide variety of securities. However, such
transactions can also be used to take on leverage as well as
maturity and liquidity mismatched exposures, and therefore can pose
risks to financial stability.


As part of its work to enhance the resilience of non-bank
financial intermediation, the FSB developed 18 policy
recommendations to address financial stability risks that arise
from SFTs. These recommendations were published in the FSB’s
August 2013 report Policy Framework for Addressing Shadow Banking
Risks in Securities Lending and Repos and updated in the November
2015 report Regulatory framework for haircuts on non-centrally
cleared securities financing transactions.

The implementation of Recommendation 16 will be extended until
January 2022 (instead of January 2021), recommendations 14 and 18
will be extended until January 2023 (instead of January 2022),
recommendation 17 will be extended until January 2024 (instead of
January 2023) and recommendation 15 will be extended until January
2025 (instead of January 2024).


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