Jeremy Rudin stressed that the OSFI is not an enemy of the banks.Mark Blinch
In his first major speech since becoming Canada's banking watchdog, Jeremy Rudin reiterated the regulator's long-standing commitment to curb excessive risk-taking and its right to go above and beyond global standards as it sees fit.
Mr. Rudin, a former assistant deputy minister in the federal finance department, became the Superintendent of Financial Institutions earlier this year. Over the lunch hour Tuesday he addressed a Bay Street audience for the first time, acknowledging that he has no plans to rock the boat – at least not yet.
"As I am only three months into the job and have eighty-one months left to go, I have not tried to make these remarks comprehensive," he wrote in his prepared remarks.
Mr. Rudin did not show any major breaks from his predecessor Julie Dickson. OSFI will continue to target excessive risk-taking as one of the biggest threats to the financial system, and in doing so, will continue to encourage banks to lead the charge.
Although OSFI believes it is critical for these institutions to curb too much risk-taking, the regulator does not like to wade into the weeds. "To the extent possible, we stay away from detailed, prescriptive rules. Rather, we prefer to rely on high-level, broadly stated principles," Mr. Rudin wrote in his remarks.
"In our approach, it is the boards and management of financial institutions, and only they, who are responsible for taking reasonable risks and managing those risks," he added. "Indeed, much of our guidance requires institutions to undertake risk management activities and to report on them."
At the same time, Mr. Rudin stressed that the regulator was not an enemy of the banks, an important message to a Bay Street audience. "We would be missing the point if we tried to stamp out risk-taking in general," he noted in his prepared remarks. "We are in this partnership because efficient and effective financial services are essential for economic growth."
The new banking superintendent expects OSFI to remain a leader in global bank regulation, and Mr. Rudin added that his organization has the right to experiment with new rules that go above and beyond global standards – but will not always do.
OSFI earned a reputation for its prudent governance of Canada's banks and insurers during the financial crisis, mainly because of its tough capital standards that surpassed the levels most global banks were required to meet.
But lately OSFI has decided that it doesn't have to lead on every front. New rules for what is known as the leverage ratio require banks to hold enough capital, equivalent to 3 per cent of the total assets. Other countries, such as the United States, have decided to double the minimum for some banks, but OSFI believes it doesn't make sense for Canadian lenders.
"We are sometimes prepared to take a liberal reading of the standards when Canadian circumstances call for it," Mr. Rudin noted.
Tim Kiladze