Canada’s banking regulator has given banks a one-year deadline to comply with new rules aimed at curbing non-financial threats, such as cultural and personality risks.
Tolga Yarkin, assistant superintendent of the Office of Financial Institutions Supervision, on Wednesday announced the regulator’s final guidelines on integrity and security issues affecting the country’s financial system. OSFI will oversee and enforce new regulations on how banks manage risks related to cybersecurity, technology, third-party providers, culture and compliance.
“Public trust in the financial sector ultimately depends on the soundness and safety of the financial institutions that make up the sector,” Yalkin said at a press conference.
“We have been dedicated to these values for quite some time, but what we are embarking on now represents an important new chapter.”
The regulator said it would step up character assessments of board members and senior executives, review how access and security is managed in offices and branches, and oversee when and how sensitive information is shared within the company.
As part of its integrity review, OSFI also monitors the culture developed by senior leaders and the corporate governance structure that governs when and how decisions are made.
Last week, the Globe and Mail revealed that the Bank of Montreal fired four mining bankers in Toronto and two others resigned over allegations of bullying and harassment of colleagues. The employee, a young male investment banker in the Toronto office of BMO’s mining group, was the target of homophobic slurs, four sources said.
Five of the six former bank employees were junior bank employees, and the other was a director in charge of supervising junior employees.
Yalkin did not comment on the specifics of the BMO BMO-T incident, but said senior leadership has an “important and meaningful” role in decisions made within the organization when it comes to culture and character. .
“We conducted a consultation and drafted culture guidelines, which show that not only the personality of senior leaders, but also the culture within an organization can ultimately have a huge impact on how risk is managed. It reflects the fact that there is a ‘face’ to it. ”
Yalkin said the regulator had distributed a survey to financial institutions to assess how well companies were meeting new expectations.
“Things like personality and culture may seem new at first glance, but compared to other financial risks we’ve tracked in the past, they’re not black and white,” he said, adding that OSFI regularly It added that it was applying its own judgment. Quantifiable indicators in financial risk. “We’re used to making difficult judgments about whether we think certain expectations will be met. Frankly, expectations aren’t just binary or black and white.”
Prior to this change, OSFI’s primary focus was to ensure banks had adequate capital and liquidity to withstand shocks to the economy and financial system. Last year, Ottawa expanded OSFI’s mandate to oversee non-financial risks.
Prime Minister Justin Trudeau’s government is stepping up enforcement measures against Canadian banks. Ottawa is also proposing new tools to address weaknesses in Canada’s anti-money laundering regime, including expanding the powers of OSFI and the Financial Transactions and Reporting Analysis Center of Canada (FINTRAC).
The changes also include guidelines for reporting incidents related to foreign influence, interference, or malicious activity. These incident reporting requirements will take effect immediately, but banks will be required to comply with most changes by January 2025.
The Canadian Bankers Association said in an emailed statement that the country’s financial institutions have strong governance and risk management “enhanced by an already extensive set of regulatory guidelines on corporate governance, non-financial risk, and technology-related risk management.” He said that he is practicing.
“In addition to OSFI, banks must also meet the extensive regulatory requirements of FINTRAC and coordinate with law enforcement agencies,” CBA spokesperson Mathieu Labreche said in a statement. “We expect these agencies to work together to develop a reasonable regulatory framework that is consistent with the government’s objectives.”