OSFI Supervisory Framework Flashcards
Main responsibility of OSFI relationship manager.
They are the main point of contact between FRFI and OSFI. They are responsible for maintaining an up-to-date risk assessment of the FRFI.
Key principles for risk assessment. (7)
- identify material risks
- should be forward-looking and allow for early intervention
- use sound predictive judgement
- understand risk drivers
- differentiate between inherent risks and management of those risks
- dynamic adjustment
- assess whole institution by calculating a CRR (Composite Risk Rating)
Primary concepts of risk assessment. (9)
- significant activities
- inherent risk
- quality of risk management
- NR (Net Risk)
- importance and ONR (Overall Net Risk)
- earnings
- capital
- liquidity
- risk matrix and CRR (Composite Risk Rating)
Describe significant activities.
- anything that is fundamental to the business model (LOB, unit, process, …)
- it’s the fundamental risk assessment concept within the supervisory framework
Describe quality of risk management.
CONTROL LEVEL 1: operational (day-to-day control of significant activities)
CONTROL LEVEL 2: oversight (of finance, compliance, actuarial, …)
Describe NR (Net Risk).
- Net Risk of significant activity = judgement on inherent risk and quality of risk management
- can be LOW, MODERATE, ABOVE AVERAGE, HIGH + trend
Describe risk matrix, CRR.
RISK MATRIX: records assessment of significant activities and risks.
CRR: culmination of assessment. Can be LOW, MODERATE, ABOVE AVERAGE, HIGH
Core supervisory processes of risk assessment. (3)
- Planning
- Execution and updating risk profile
- Reporting and intervention
Fundamental concept of OSFI’s supervision of risk assessment.
Significant activities
OSFI’s steps (4).
STEP 1: identify significant activities
STEP 2: assess inherent risks and quality of risk management
STEP 3: calculate NR for each significant activity using Appendix C
STEP 4: use risk matrix to assess intervention status and CRR - Appendices D and E