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OSFI proposes changes to guidelines on corporate board structures, management practices


April 5, 2012   by Canadian Underwriter


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The Office of the Superintendent of Financial Institutions (OSFI) is proposing to update its 2003 Corporate Governance Guideline to encourage relevant financial industry experience on corporate boards, third-party reviews of management practices and the separation of risk and audit committees.

“We expect the revised guideline to be available for comment before this summer,” OSFI superintendent Julie Dickson said in notes to her address to the Toronto Board of Trade on Apr. 5.

Regarding new guidelines on board composition, “it is accepted that boards need a broad range of skills,” Dickson said, adding that OSFI is concerned about gender diversity, among other issues with board composition. “But OSFI is also focused on one other issue unique to financial services: the fact that boards of financial institutions need to have some relevant financial industry expertise, in addition to an array of other skills.”

Dickson noted financial industry expertise on boards can help to address any knowledge gap that might exist between directors and management. It can also help deal with insurer liabilities that might be “more opaque to the outside than other corporations.”

OSFI is also calling for third party reviews of management processes, although it “will not be prescriptive in this regard,” Dickson says. She said the regulator does “not intend to tell the boards who they should hire to conduct the reviews, what the scope should be, and how often these reviews should occur.”

Rather, the regulator is looking for agreement from the industry on the principle of whether third party reviews are important for benchmarking the company’s risk management processes.

Finally, OSFI is calling for “the separation of risk and audit committees in complex institutions,” Dickson says. “Many boards have already done this, recognizing that the workload has increased and that separation allows for enhanced focus on risk, as well as on audit.”


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