Vol. 139, No. 50 — December 10, 2005

Regulations Amending the Charges for Services Provided by the Office of the Superintendent of Financial Institutions Regulations 2002

Statutory authority

Office of the Superintendent of Financial Institutions Act

Sponsoring agency

Office of the Superintendent of Financial Institutions

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Description

Under the Office of the Superintendent of Financial Institutions Act, the Governor in Council may make regulations prescribing charges for any service provided by, or on behalf of, the Superintendent. The Regulations Amending the Charges for Services Provided by the Office of the Superintendent of Financial Institutions Regulations 2002 (the "Regulations") are proposed pursuant to sections 23.1 and 38 of the Office of the Superintendent of Financial Institutions Act. The proposed Regulations would eliminate all service charges except those that are paid by non-federally regulated financial institutions (FRFIs), such as new applicants, and those that are charged for rulings, interpretations, capital quality confirmations, and copies of corporate documents. The proposed Regulations would reduce the number of service charges from 52 to 14. No changes to the level of fees currently charged for the remaining services are being proposed. In addition, the proposed Regulations would repeal section 4 of the Charges for Services Provided by the Office of the Superintendent of Financial Institutions Regulations 2002.

The Office of the Superintendent of Financial Institutions (OSFI) currently funds its annual operating costs primarily through base assessments on financial institutions (based on the size of the institution) and, to a lesser extent, through service charges paid by financial institutions and other users of OSFI's services. A reduction in user fee revenue will not impact OSFI's total costs, just the proportion derived from base assessments versus service charges.

The user pay system came in effect on January 1, 1999, with the promulgation of the Service Charges (Office of the Superintendent of Financial Institutions) Regulations. The Charges for Services Provided by the Office of the Superintendent of Financial Institutions Regulations 2002 came in effect in September of 2002 to make the user pay scheme applicable to bank holding companies and insurance holding companies and to capture various other new approvals and services. The Charges for Services Provided by the Office of the Superintendent of Financial Institutions Regulations 2002 were amended on August 13, 2003, to increase the service charges to better account for the actual cost of providing the services.

The proposed Regulations eliminate the majority of service charges, recognizing that the charges have not resulted in a significant redistribution of OSFI's costs among FRFIs and that the charges do not recover a meaningful percentage of OSFI's annual costs. In other words, service charges currently recover less than 4% of OSFI's total regulatory and supervisory costs charged to institutions, and eliminating the majority of service charges has little impact on the total amounts individual FRFIs pay. Furthermore, the administration associated with the system, such as tracking, verifying, and reporting on services charges, is resource intense and costly. Charges for services provided to non-FRFIs (e.g. new applicants) and for rulings, interpretations, capital quality confirmations, and copies of corporate documents are being retained on the basis that charging for these services, which are often resource intensive, represents a more equitable approach to recovering OSFI's costs associated with those services than would charging these services directly to FRFIs through base assessments. This overall approach is broadly consistent with that of major financial regulators in other countries.

Alternatives

Three options were considered:

I. Status quo;

II. Eliminate all service charges; and

III. Eliminate all service charges except those that are paid by non-FRFIs and for rulings/interpretations and capital quality confirmations.

Analysis

Administering the service charges system is resource intensive and costly. Furthermore, OSFI found that there has been only marginal redistribution of cost among FRFIs as a result of charging for services.

OSFI considered eliminating all service charges. However, eliminating all charges, including charges for services outside the normal course of regulation and supervision (e.g. rulings), could result in a significant increase in requests for such services. This would subsequently cause an increase in overall costs assessed to the industry. In addition, elimination of charges for services provided to non-FRFIs would cause FRFIs to bear the costs for these services through an increase in assessments, which would not be equitable.

Benefits and costs

As part of OSFI's review, for each regulated institution the total amount (i.e. base assessments plus service charges) paid to OSFI under the current regime (i.e. option I) was compared with the total amount under the proposed regime (i.e. option III). This review indicated that option III would result in only a slight re-distribution of total amounts charged to institutions through base assessments. More specifically, total amounts charged to certain institutions increased marginally whereas other institutions' net costs decreased somewhat. Furthermore, administering the service charges system is resource intensive and costly. The elimination of the majority of service charges will also modestly reduce OSFI's expenses.

OSFI does not retain any user fee revenues for its own account. Any service charge revenue collected from institutions in a given industry is deducted from OSFI's annual supervisory costs allocated to that industry. The residual balance of the supervisory costs will continue to be recovered from institutions in each industry using a formula-based annual assessment.

Consultation

Given that this policy will result in modest changes to the levels of assessments that some institutions will pay, industry associations and selected FRFIs (those that were most affected) were consulted. As well, each of the FRFIs that were consulted was provided with estimates of how the new policy would affect their institution. None of the industry associations and institutions expressed concerns with the proposal to reduce the number of service charges.

None of the stakeholders expressed concerns with the proposal to repeal section 4 of the Charges for Services Provided by the Office of the Superintendent of Financial Institutions Regulations 2002.

Compliance and enforcement

The proposed Regulations would reduce the number of service charges from 52 to 14. In addition, the proposed Regulations would repeal section 4 of the Charges for Services Provided by the Office of the Superintendent of Financial Institutions Regulations 2002. The reduction of the number of charges will not require significant changes in OSFI's procedures. However, the costs associated with the administration of the system, such as tracking, verifying, and reporting on services charges, will decrease somewhat.

Contact

Mr. Emiel J. van der Velden, Regulations Officer, Legislation and Policy Initiatives, Office of the Superintendent of Financial Institutions, 255 Albert Street, Ottawa, Ontario K1A 0H2, (613) 998-7479.

PROPOSED REGULATORY TEXT

Notice is hereby given that the Governor in Council, pursuant to sections 23.1 (see footnote a) and 38 (see footnote b) of the Office of the Superintendent of Financial Institutions Act (see footnote c), proposes to make the annexed Regulations Amending the Charges for Services Provided by the Office of the Superintendent of Financial Institutions Regulations 2002.

Interested persons may make representations with respect to the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Mr. Emiel J. van der Velden, Legislation and Approvals Division, Office of the Superintendent of Financial Institutions, 255 Albert Street, Ottawa, Ontario K1A 0H2 (tel.: (613) 998-7479; fax: (613) 998-6716; e-mail: Emiel.vandervelden@ osfi-bsif.gc.ca).

Ottawa, November 28, 2005

DIANE LABELLE
Acting Assistant Clerk of the Privy Council 

REGULATIONS AMENDING THE CHARGES FOR SERVICES PROVIDED BY THE OFFICE OF THE SUPERINTENDENT OF FINANCIAL INSTITUTIONS REGULATIONS 2002

AMENDMENTS

1. Section 4 of the Charges for Services Provided by the Office of the Superintendent of Financial Institutions Regulations 2002 (see footnote 1) is repealed.

2. Items 5 to 13 of Schedule 1 to the Regulations are repealed.

3. Items 17 to 20 of Schedule 1 to the Regulations are repealed.

4. Items 22 to 39 of the Schedule 1 to the Regulations are repealed.

5. Items 41 and 42 of Schedule 1 to the Regulations are repealed.

6. Items 5 to 9 of Schedule 2 to the Regulations are repealed.

COMING INTO FORCE

7. These Regulations come into force on the day on which they are registered.

[50-1-o]

Footnote a

S.C. 1999, c. 28, s. 131

Footnote b

S.C. 2001, c. 9, s. 477

Footnote c

R.S., c. 18 (3rd Supp.), Part I

Footnote 1

SOR/2002-337

NOTICE:
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