Final Version Of OSFIs Corporate Governance Guideline Released
The Office of the Superintendent of Financial Institutions Canada (OSFI) has released the final version of its revised Corporate Governance Guideline (the Final Guideline). The release of the Final Guideline follows an extensive consultation process that began in August 2012 when OSFI released a draft revised Corporate Governance Guideline (the Draft Guideline) for public comment. The Draft Guideline proposed significant changes in the areas of board effectiveness, risk governance and the roles of the chief risk officer (CRO) and the audit committee. For a summary of the Draft Guideline, please refer to our earlier bulletin. This Bulletin provides an overview of differences between the Final Guideline and the Draft Guideline and offers some observations regarding the Final Guideline.
Overview of Key Changes From the Draft Guideline OSFI received over 30 submissions following the release of the Draft Guideline and has made a number of changes in the Final Guideline in response to these comments. OSFI's letter accompanying the Final Guideline includes an Annex summarizing key comments received from the public and an explanation of how these comments were dealt with in the Final Guideline. Some of the key changes are summarized below.
In response to concerns that the Draft Guideline was not flexible enough for smaller institutions, the Final Guideline has been revised to clarify which elements can be applied in a more flexible manner depending on the institution's circumstances (e.g., an institution does not necessarily need to have a dedicated CRO). Clarification regarding the application of the Final Guideline to subsidiaries. With respect to an institution's oversight functions, the Final Guideline contains changes making it clear that the role of the Board is to approve the mandate, resources and budget of the oversight functions. In response to concerns about expectations described in the Draft Guideline regarding independent third party reviews, the Final Guideline takes a different approach. It provides that the Board should regularly conduct a self-assessment of the effectiveness of Board and Board Committee practices, occasionally with the assistance of independent external advisors. It also provides that the Board should regularly assess the effectiveness of the oversight functions and processes and occasionally, as part of its assessment, conduct a benchmarking analysis of those functions or processes with the assistance of...
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