Release of the 2014 Annual Report on Bank of Canada Oversight Activities

The Bank of Canada today published the 2014 annual report on its oversight of payment, clearing and settlement systems, which are also known as financial market infrastructures or FMIs.

The Bank’s oversight mandate is to promote the safety and efficiency of the Canadian financial system through sound risk management at designated FMIs. The purpose of the Bank of Canada Oversight Activities 2014 Annual Report is to inform stakeholders about key risk management matters at FMIs.

Expanded Oversight Role – The Bank’s powers were expanded to include the oversight of payment systems that are critical to the Canadian economy while not having the potential to pose systemic risk (“prominent payment systems”). Criteria to identify prominent payments systems and to set appropriate risk-management standards will be developed in 2015.

Stronger risk-based assessment framework - Following a periodic review of its oversight practices, the Bank strengthened its risk-based framework for consistently evaluating risks of designated FMIs.

Policy guidance - In coordination with the Canadian Securities Administrators (CSA), the Bank published draft supplementary guidance to provide clarity on certain aspects of the CPMI-IOSCO Principles for Financial Market Infrastructures - which the Bank adopted as part of its risk management standards. In 2015, additional supplementary guidance on FMI recovery plans and tiered participation will be developed.

FMI resolution regime – Building on the preparatory work that was conducted in 2014, the Bank and its federal partners are beginning to develop an FMI resolution regime that incorporates the FSB’s Key Attributes for Effective Resolution Regimes. This work will include developing policy proposals for legal, governance and communications frameworks, as well as FMI-specific resolution strategies. This is expected to be a multi-year initiative.

Priorities for designated domestic FMIs – In parallel with efforts around the world, designated FMIs have made significant progress toward addressing major gaps in observing the PFMIs. Implementation of the PFMIs, including preparatory work on developing recovery plans, will continue to be a priority in 2015. The Bank has also required FMIs to complete a self-assessment of their cyber-security practices to ensure they contain the necessary properties and characteristics to protect against elevated threat levels.

Priorities for designated Foreign FMIs – For foreign-domiciled FMIs, the Bank conducts its oversight primarily through co-operative oversight colleges led by a foreign lead regulator. Both CLS Bank and LCH SwapClear made changes to comply with new regulations in their respective home jurisdictions.

For further information, please contact:

Assistant Chief
Financial Stability Department
Bank of Canada
613 782-8225

Bank of Canada
613 782-8782