Tackling financial risks requires united front, says regulator

OSFI chief underscores importance of collaboration at international roundtable

Tackling financial risks requires united front, says regulator

Superintendent of Financial Institutions, Peter Routledge, has emphasized the value of information sharing, benchmarking, and collaborative problem-solving among regulators.

“The power of these roundtable sessions lies in information-sharing, benchmarking, and collaborative problem-solving,” Routledge said in his closing remarks at the inaugural in-person International Chief Risk Officer (CRO) Roundtable. “Over the last two days, we showed how committed we all are to collaboration, and we’ve all learned a little more about each other’s challenges and circumstances. I have no doubt that our discussions will help us better understand the complexities we all try to navigate as prudential regulators.”

He highlighted the significance of the risk function driving strategy and governance at financial institutions regulators, adopting an “outside-in approach.”

“In particular, our risk, strategy, and governance initiative has helped us better define the risks that we’re willing to take to fulfill our mandate,” Routledge said. “It also allowed us to implement an effective second-line challenge function over our operations and business activities. We’re pretty proud of that.”

Routledge also underscored the importance of sustaining and enhancing a “will to act,” referring to OSFI’s new supervisory framework. He expressed concerns about the weakening consensus around bank regulation following the financial crisis.

“OSFI has done its part in keeping Canada’s financial system stable through some very turbulent times. But we can’t rely on our track record to be a guarantor of our success in today’s new and more volatile risk environment,” he cautioned.

Acknowledging the rapidly evolving risk landscape, Routledge stressed the need for regulators to adapt their risk management practices proactively. He cited risks ranging from reputational concerns to climate change, cyber threats, culture and compliance issues, and executing new mandates.

“I’m sure we can all agree – this pace of change is not going to slow down,” said Routledge. “Just like the financial institutions we regulate, regulators face risks in delivering on our mandates and maintaining public confidence in our financial systems.

“Be it reputational risk, climate change, cyber and information security concerns, culture and compliance, or executing new mandates – new and emerging risks pose their own set of challenges. Additionally, these need to be balanced with more ‘traditional’ prudential regulatory risks such as housing, liquidity and credit.”

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The superintendent advocated for leveraging collective experiences and best practices through roundtable sessions to enhance risk management practices and build resilience against emerging risks.

“Getting together to talk about the challenges we encounter and how to address them in forums like these is incredibly beneficial,” Routledge said. “By leveraging our experiences and best practices through these roundtable sessions, we’re enhancing our risk management practices and becoming more resilient against the ever-evolving risk landscape at the same time.”

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