OSFI.CorpGov

Question 1

What is an FRFI?

Answer 1

Federally Regulated Financial Institutions

Question 2

define “Corporate Governance”

Answer 2

a set of relationship between (SBSM , relationship between SHABI SM)
- BoD
- management
- shareholders
- other subsidiaries

Question 3

characteristics of good corporate governance
= what are the two things good corporate governance should do?

Answer 3

• incentivize good corporate behavior
• enable monitoring of operations and performance

Question 4

what does FRFI’s corporate governance practice depend on?

Answer 4

SOS- RN (SOS Right Now)
- size
- ownership structure
- strategy
- risk profile
- nature, scope and complexity of operations

Question 5

what are the 2 areas good corporate government is important for?

Answer 5

• maintain confidence in depositors and PHs
• overall market confidence

Question 6

contrast roles of BoD and SM

Answer 6

BoD: direction setting, oversight of management
SM: implement BoD decisions, oversight of operations

Question 7

what are the responsibilities of BoD in corporate governance?

Answer 7

• business plan
• strategy
• risk appetite and culture
• oversees SM and internal control

Question 8

What are the responsibilities of SM in corporate governance?

Answer 8

• implementing BoD’s decisions
• oversees operations

Question 9

role of corporate governance in OSIF’s supervision

Answer 9

• OSFI relies on good corporate governance to support its supervisory role
• OSFI requires BoD involvement during interventions to determine best corrective actions

Question 10

What items should a risk appetite framework contain?

Answer 10

TRIPLE Rs
- RAS (Risk Appetite Statement)
- RL (Risk Limits)
- RR (Roles and Responsibilities of RAF implementation)

Question 11

provide a general description of risk appetite statement

Answer 11

reflects level, and type of risk FRFI is willing to accept to meet business objectives

Question 12

key features of risk appetite statement

Answer 12

• linked to FRFI’s short and long term strategic, capital and financial plans
• includes qualitative and quantitative measures of risk
• forward looking
• consider normal and stressed scenarios

Question 13

what do qualitative and quantitative measures include in RAS?

Answer 13

• Qualitative: identify significant risks company wants to take/avoid and why
• Quantitative: measures of ECL (Earnings, Capital, Loss) FRFI is willing to accept

Question 14

describe the concept of risk limits within the risk appetite framework

Answer 14

risk limits refer to allocations of FRFI’s risk appetite statement to:
- specific risk categories (IMCO)
- business unit
- LOB or product

Question 15

once BoD approves, who implements RAF?

Answer 15

SM

Question 16

how is compliance with risk appetite framework ensured?

Answer 16

• CRO: ensures aggregate risk limits are consistent with RAS
• CRO: provide regular reports to BoD and SM assessing risk limits and risk appetite statement
• internal auditor: ensure compliance with RAF

Question 17

what should the report to BoD and SM include related to RAF?

Answer 17

a comparison of actual results VS. stated RAF measures.
Where breaches are identified, action plans should exist and be communicated to the Board.

Question 18

what are some factors that set financial institutions apart from other business firms? These factors lead FIs to higher level of regulation

Answer 18

• effectiveness of economy depend on financial services wellbeing
• may have higher leverage, makes them more vulnerable to adverse events
• requires high degree of confidence in long term stability