Reports on Observance of Standards and
1. This report provides an assessment of Canada's observance of and consistency with relevant international standards and core principles in the financial sector, as part of a broader assessment of the stability of the financial system. This assessment work by the IMF was undertaken under the auspices of the IMF-World Bank Financial Sector Assessment Program (FSAP) based on information up to October 1999. This has helped to place the standards assessments in a broader institutional and macroprudential context, and identify the extent to which the supervisory and regulatory framework has been adequate to address the potential risks in the financial system. The assessment has also provided a source of good practices in financial regulation and supervision in various areas.
2. The assessment covered (i) the Basel Core Principles for Effective Banking Supervision; (ii) the International Organization of Securities Commissions' (IOSCO) Objectives and Principles of Securities Regulation; (iii) the International Association of Insurance Supervisors' (IAIS) Supervisory Principles; (iv) the Committee on Payment and Settlement Systems' (CPSS) Core Principles for Systemically Important Payment Systems; and (v) the IMF's Code of Good Practices on Transparency in Monetary and Financial Policies. Such a comprehensive coverage of standards was needed as part of the financial system stability assessment for Canada in view of the increasing convergence in the activities of banking, insurance, and securities firms, and the integrated nature of the markets in which they operate. It should be noted that some of the standards are still in draft form, and some do not yet have a complete methodology to systematically assess compliance or consistency.2 This module was prepared in consultation with the Canadian authorities in the context of the IMF FSAP mission that visited Canada in October 1999, and constitutes a summary of the detailed assessments prepared by the mission. The summary was part of the Financial System Stability Assessment (FSSA) report that was considered by the IMF Executive Board on February 2, 2000, in the context of the IMF's Article IV consultation discussions with Canada.
3. The assessment of standards and codes draws on the self-assessments of the Canadian authorities, and on the field work undertaken October 11-22, 1999, based on a peer review process by Kai Barvll (Payment Systems, Sveriges Riksbank), Karl Driessen and Charles Siegman (Transparency Code, IMF), Alvir Hoffmann (Banking Supervision, Banco Central do Brasil), Rodney Lester (Insurance, World Bank), Michael Martinson (Banking Supervision, Board of Governors of the Federal Reserve System), Stefan Spamer (Banking Supervision, Deutsche Bundesbank), and Shane Tregillis (Securities, Australian Securities and Investments Commission). The expert team was coordinated by the IMF FSAP mission, led by V. Sundararajan, and comprised R. Barry Johnston, Karl Driessen, Haizhou Huang and Martin Cerisola. The assessment has been communicated to the authorities.
4. Overall, the assessment found a high degree of compliance that had contributed to a stable financial system. Minor deviations from Basel Core Principles of Effective Supervision were detected, which are addressed by proposals contained in the Policy paper.3 Full compliance with the Core Principles for Systemically Important Payment Systems was noted for the Large Value Transfer System. Canada is broadly compliant with all principles of insurance regulation, and is broadly consistent with IOSCO Objectives and Principles of Securities Regulation. The complexity of federal/provincial regulatory arrangements, oversight of mutual funds, and resource limitations on the enforcement capacity of some securities commissions are areas of concern that are being addressed. There is a high degree of consistency with the Code of Good Practices on Transparency in Monetary and Financial Policies. The more specific findings in the area of transparency of Monetary and Financial Policies are discussed below.
5. Overall, the general governance environment in Canada is quite disposed towards transparency, and the degree of transparency in the area of monetary and financial policies is high. Transparency is often an operating principle, built on a longstanding tradition. The legislative framework—which includes an Access to Information Act—is supplemented by an open environment that favors release of statements, and actively seeks input from the public for policy initiatives. At the same time, efforts are under way to strengthen the transparency aspects of financial and monetary policies, including through greater use of the internet and greater responsiveness to the public's demand for additional openness. A tabular summary of consistency with the Code of Good Practices on Transparency in Monetary and Financial Policies is provided in Table 1. Transparency practices in the following domains are reviewed: (i) monetary policy; (ii) banking and insurance supervision; (iii) securities supervision; (iv) payment systems oversight; and (v) deposit insurance.
A. Transparency in Monetary Policies
6. The following considers the transparency practices in Canada in the area of monetary policy as they relate to the broad principles underlying the IMF Code of Good Practices on Transparency in Monetary and Financial Policies. The Code identifies desirable transparency practices for central banks in their conduct of monetary policy. In making the objectives of monetary policy public, the central bank enhances the public's understanding of what it is seeking to achieve, and provides a context for articulating its own policy choices, thereby contributing to the effectiveness of monetary policy. Further, by providing the private sector with a clear description of the considerations guiding monetary policy decisions, transparency about the policy process makes the monetary policy transmission mechanism generally more effective. By providing the public with adequate information about its activities, the central bank can establish a mechanism for strengthening its credibility by matching its actions to its public statements, and ensure that market expectations can be formed efficiently.Background and overview
7. Monetary policy in Canada is conducted in an inflation targeting framework which includes strong transparency and accountability arrangements to forge credibility. The inflation target, currently defined as a range between 1 and 3 percent per annum for consumer price inflation, is agreed and announced jointly by the Department of Finance and the BoC. As its main operating instrument, the BoC sets an interest rate band of 0.5 percent around a target overnight rate by offering standing deposit and borrowing facilities to participants in the LVTS payment system, with a view to maintaining a path of monetary expansion consistent with the inflation target.4Clarity of roles, responsibilities, and objectives
8. The ultimate objectives of the BoC are specified in general terms in the preamble to the BoC Act, and include regulating credit and currency in the best interest of the economic life of the nation, controlling and protecting the external value of the Canadian dollar, mitigating fluctuations in trade, production, prices and employment, and, more generally, promoting the economic and financial welfare of Canada. The current inflation targeting framework clearly defines the inflation objective, and clarifies that maintaining low inflation is given primacy among BoC objectives-as a means to achieving the broader goals of the preamble-and thus increases transparency. Broad modalities of accountability for monetary policy and other responsibilities are clearly specified in the BoC Act. Foreign exchange policy is assigned to the Minister of Finance, with the BoC playing an agency role. This Act also contains the provision for a "Government Directive," which outlines clearly the exceptional circumstances of a Ministerial override of monetary policy decisions, and the associated disclosure policy. Terms of appointment of the Governor, including disclosure procedures for removal for cause, are also specified in legislation.
9. The institutional relationship between monetary and fiscal operations is clearly defined, with the BoC designated as the fiscal agent for the government. The amounts and conditions of net credit to government are disclosed, including through frequent balance sheet updates. Other agency roles, including in foreign exchange operations and government debt management, are also clearly specified and detailed in public documentation. In this regard, the BoC has issued a series of guidelines and notes detailing the terms and conditions of auctions of government securities.
10. Assessment: Fully consistent with the Code.Open process for formulating and reporting policy decisions
11. The monetary policy framework, instruments, and targets are disclosed and explained, including in speeches and periodic reports. For the inflation targeting framework to operate efficiently and coordinate inflation expectations, credibility of the BoC plays a crucial role. Thus, transparency is a strategic operating principle for the BoC in the conduct of its policies and activities, and BoC management is devoting more attention and resources to achieve greater transparency and better communication with the public.5 In this vein, progress in achieving its objectives is reported in semi-annual monetary policy reports6 as well as the annual report. There is no permanent policy-making body apart from a Governing Council, which is internal to the BoC. Changes in policy settings, e.g., in the band for overnight interest rates, are immediately disclosed and explained. Substantive policy changes are subject to extensive public consultation.
12. Assessment: Fully consistent with the Code.Public availability of information
13. Canada subscribes to and meets the specifications of the SDDS. The BoC publishes its balance sheet weekly, monthly, and annually; the balance sheet provides aggregate information on lending to the banking sector and to government. Information on emergency lending can be gleaned from the balance sheet, in combination with the monthly publication of individual bank balance sheets. The BoC maintains public information services, which offer a publication program with a wide array of documentation, and which also support the information requirements of the inflation targeting framework.
14. Assessment: Fully consistent with the Code.Accountability and assurances of integrity
15. The Governor is required to consult regularly with the Minister of Finance, and appears before parliamentary committees, including after the publication of the Monetary Policy Report and the Annual Report. The financial statements of the BoC are audited by external auditors; internal audit arrangements are the responsibility of the Audit Committee of the Board of Directors of the BoC. Operating income and expenditure are included in the annual financial statements. Standards for the conduct of personal financial affairs are published for the Governor and Senior Deputy Governor; those for staff are available to the public. Currently, legal protection for staff is provided for certain activities performed in good faith under the PCS Act.
16. Assessment: Fully consistent with the Code. Improved legal protection for staff is currently being proposed to also cover staff actions in the pursuit in good faith of other activities of the BoC.
B. Transparency of Financial Policies
17. This section discusses transparency practices by financial agencies responsible for banking and insurance supervision, securities supervision, payment systems oversight, and deposit insurance. Transparency in financial policies is important, inter alia, in promoting public confidence in the financial system, and in helping to reduce costs of regulation, and thus can improve financial sector efficiency. Greater transparency in financial policies also helps to promote market discipline by more clearly delineating the roles and responsibilities of the regulators versus the private sector.Banking and insurance supervision Background and overview
18. The Office of the Superintendent of Financial Institutions (OSFI) is the agency responsible for supervision and oversight of both the banking and insurance sector. Overall, transparency practices of OSFI are of high quality. The roles, responsibilities, and objectives are generally clearly defined in legislation; the policy formulation and reporting process is transparent and well developed; information on the relevant policies is widely available; and the level of accountability is high, and the degree of assurance of integrity appropriate. Also, OSFI discloses its mandate through its mission statement, which is published widely, including in the OSFI bulletin (a stakeholder bulletin), its website, and the annual report. OSFI is also required by the OSFI Act to report on progress made by financial institutions in enhancing disclosure of information on financial condition. It has issued several guidelines to assist banks and other financial institutions with disclosure, including on derivatives and credit and market risk management.
19. Disclosure by financial institutions is a key element in the emerging regulatory paradigm in the insurance sector, with the purported advantage of using the market to discipline management and boards of directors. Canada is one of the first countries with high levels of disclosure and reporting consistent with Canadian GAAP. Nevertheless, actuaries have retained wide authority to set assumptions, which vary widely in practice. This is a source of concern for OSFI, given the fact that key items such as future investment returns and mortality/morbidity do not lend themselves to huge variation. Thus effective market discipline may require even greater disclosure of actuarial assumptions.Clarity of roles, responsibilities, and objectives
20. The broad objectives—regulating financial institutions so as to contribute to public confidence from a safety and soundness perspective—and the institutional framework—including the broad modalities of accountability and terms of appointment of the Superintendent—for OSFI are defined in the OSFI Act, the Bank Act, the Insurance Companies Act, and others, and explained in various publications. The relationship with other federal financial agencies such as CDIC and BoC in coordinating bodies as the Financial Institutions Steering Committee (FISC) and Senior Advisory Committee (SAC) are publicly disclosed.
21. Banks are federally regulated, and securities firms fall under the jurisdiction of the provinces. However, banks own the largest securities firms. The Hockin-Kwinter Accord (1987) delineates regulatory responsibilities between OSFI and the Ontario Securities Commission (OSC), and the Bank Act makes it clear that OSFI is ultimately responsible for banks on a consolidated basis. Nevertheless, the distinction between the products offered by banks and securities firms is disappearing, and more of banks' activities take place on the books of its securities subsidiaries. At the same time, banks have substantially increased their own securities operations. In addition, banks face a multitude of regulators when offering securities products.
22. Assessment: Broad consistency with the Code; one area for improvement is the clarity of roles and responsibilities with regard to the supervision of securities activities of banks. Clarity of roles and responsibilities is important for at least two reasons: (i) complicated arrangements lead to uncertainty in interpretation and thus to higher cost; and (ii) accountability is easier to assign if roles and responsibilities are clearly specified. The arrangements for regulating banks and securities firms suffer in both respects. An audit has found little or no overlap between CDIC's Standards and OSFI Guidelines. The Policy paper is addressing the issue by streamlining and facilitating compliance and increasing coordination between OSFI and CDIC to minimize the reporting burden on institutions.Open process for formulating and reporting policy decisions
23. The conduct of financial policies by OSFI is transparent, with good access by the public to operating procedures and regulations (including access through the internet to some forms for insurance companies). OSFI's new Supervisory Framework: 1999 and Beyond, in which the regulatory framework is defined and explained, was distributed widely, and also explained through the periodic stakeholder bulletins and the annual reports. There are also public hearings, and the transcripts are available to the public. Information sharing arrangements, including with foreign bank supervisors, other financial agencies, and a commercial database service, are publicly disclosed. Significant policy changes are announced and explained, and benefit from extensive consultation with the public, and with federally regulated financial institutions in particular. Federal financial statutes are subject to the sunset clause, requiring periodic review of the legislation; the consultation process is strengthened as a result. The annual report and other publications provide information on progress made in achieving OSFI's objectives.
24. Assessment: Fully consistent with the Code.Public availability of information
25. A wide array of publications is available through OSFI's public information service, including the annual report, the more informal "OSFI bulletin," and speeches. The annual report contains information on developments in the sector, in particular regulatory trends and developments. Regulations are published in book form and widely available to the public. Information on insurance policy-holder guarantees is available through the industry-backed organizations Property and Casualty Insurance Compensation Corporation (PACICC) and Canadian Life and Health Insurance Compensation Corporation (CompCorp). OSFI's role in consumer protection is being transferred to another agency under proposals contained in the Policy paper.
26. Assessment: Fully consistent with the Code.Accountability and assurances of integrity
27. The Superintendent has prescribed meetings with the Minister of Finance for accountability purposes; in addition, occasional meetings with parliamentary committees take place upon request. The annual report contains financial statements that cover expenditure and revenue; OSFI's accounts form part of general government, and a balance sheet is thus not separately available, nor is an independent audit performed. A Code of Professional Conduct, currently being revised, is issued to staff upon employment, and available to the public.
28. Assessment: Fully consistent with the Code.Securities supervision
Background and overview
29. Overall, transparency practices are of high quality.7 The roles, responsibilities, and objectives of securities commissions are generally clearly defined in legislation; the policy formulation and reporting process is transparent and well developed; information on the relevant policies is widely available; and the level of accountability is high, and the degree of assurance of integrity appropriate. Similarly, the practices involving Self Regulatory Organizations (SROs) are satisfactorily addressed in the Canadian case.
30. Some recent developments have significantly improved certain transparency practices. Most important is the fact that the five largest Securities Regulatory Authorities (SRAs) have achieved self funding status. This change has altered these SRAs accountability patterns. There seems to be much greater awareness that agencies must explain any initiatives they undertake to the public. It has resulted in a more proactive stance towards improving transparency, including through expanded outreach programs.Clarity of roles, responsibilities, and objectives
31. The broad objectives—including market stability and fairness—and institutional framework of SRAs are laid down in provincial securities laws, and frequently explained in additional publications, including Statement of Priorities. Rule-making power has only recently made inroads into securities regulation, and is not yet universal.
32. SRO oversight is publicly disclosed, and generally well designed through the recognition process and the associated powers to approve changes in by-laws, which typically are published in the official bulletin. Mutual reliance arrangements are in place between SRAs in case of national SROs.
33. Securities supervision is the responsibility of provincial authorities, and practices differ across jurisdictions. In addition, there are national SROs, such as IDA and MFDA, whose official status varies across provinces. The informal status of the CSA as an coordinating body of SRAs, and the absence of a formal coordination mechanism with federal regulators are also noted. Moreover, banks are supervised by OSFI on a consolidated basis, while their securities subsidiaries are primarily supervised by the provincial regulators; banks have also increased significantly securities trading on their own account.
34. Assessment: Partial consistency with the Code: the complexity of the regulatory structure, including between federal and provincial regulators as well as between provincial regulators and SROs, contributes to a lack of clarity in roles and responsibilities between provincial regulators, and between provincial and federal regulators; these issues call for increasing coordination between federal and provincial levels, and more clarity on which agency will be the lead regulator.Open process for formulating and reporting policy decisions
35. The conduct of financial policies of SRAs is generally transparent, with public disclosure of the regulatory framework, supported by explanations in the Bulletin and other publications. Financial reporting requirements are publicly disclosed, and to a large extent centralized nationally through the CIPF, which operates an early warning system for the benefit of SRAs. The fee structure is also disclosed. Arrangements for the sharing of information, including with OSFI, are made public. Consultation before significant policy changes is standard. Public reporting on achieving SRAs objectives is done through the annual report, as well as through other publications.
36. Assessment: Fully consistent with the Code.Public availability of information
37. The recent financial independence of some SRAs has contributed to increased awareness to be more accountable, including through better public availability of information. SRAs generally have public information services, with a large publication program catering both to the general public and the industry. The annual report typically reports on regulatory developments in the industry, and contains balance sheets. In addition to providing written materials, senior officials make regular appearances to explain the SRA's activities. SRAs play a publicly disclosed role in overseeing SRO's arbitration programs, as well as the CIPF consumer protection arrangement.
38. Technology developments have contributed to improved disclosure practices, as availability of information through the internet has expanded greatly, and reduced the marginal cost of disclosure. As a result, websites of regulatory authorities now make public a growing range of information, covering the range from regulations to general information pamphlets.
39. Assessment: Fully consistent with the Code.Accountability and assurances of integrity
40. Heads of SRAs are generally available to appear before a designated public authority by the respective securities acts. Financial statements are generally audited by the provincial government auditor; statements are prepared in accordance with GAAP, and include operating expenses and revenues. Standards for the conduct of personal financial affairs of officials and staff are contained in by-laws or special Code of Ethics and publicly disclosed. Legal protections for staff are disclosed in the respective securities acts.
41. Assessment: Fully consistent with the Code.Payment systems
Background and overview
42. The major payment and clearing systems in Canada are the Large Value Transfer System (LVTS) for large value payments, the Debt Clearing System (DCS) for transactions involving federal government treasury bill and bonds and private sector money market securities (both system being overseen by the Bank of Canada, under the Payment Clearing and Settlement Act of 1996) and the Automated Clearing Settlement System (ACSS) primarily for retail payments.
43. The LVTS and ACSS are operated by a private organization, the Canadian Payments Association (CPA), in accordance with the Canadian Payments Association Act, which came into force in 1980. As of July 28, 1999, the CPA membership consisted of 143 member institutions; the Bank of Canada, 59 chartered banks, 26 credit union centrals and federations, 39 trust, mortgage and loan companies and eighteen other deposit-taking institutions. The retail payments are primarily based on checks even though card-payments are increasing, and some 10 percent of large value payments continues to be paper-based.
44. A conflict of interest may potentially arise due to the fact that the LVTS system is operated through a private organization (the CPA) that is chaired and co-chaired by the BoC which is also the overseer of the system.Clarity of roles, responsibilities, and objectives
45. The PCS Act gives the Bank of Canada explicit and formal responsibility for the oversight of payment and other clearing and settlement systems that could be operated in such a manner as to pose systemic risk and the capacity to conduct oversight activities. In addition, the objectives and framework are explained in speeches, discussion papers, and articles. Although other agencies also play a role in overseeing payment systems, the BoC is responsible under the PCS Act to ensure that appropriate risk containment arrangements are used by clearing and settlement systems which could pose systemic risk. The oversight responsibility is limited to clearing and settlement systems operated by private self-regulatory organizations, not the organizations themselves.
46. The PCS Act gives the Bank the power to designate, to enter into agreements with clearing houses, to issue directives, to request information, and to audit and inspect clearing houses, among others. By-laws of the CPA are approved by the Federal Cabinet. The PCS Act stipulates that Minister of Finance must be of the opinion that the designation is in the public interest. Also, a directive to a clearing system that is established by statute (e.g., LVTS) must be approved by the Minister.
47. Assessment: Fully consistent with the Code. Proposals contained in the Policy paper regarding additional roles for the Department of Finance in designating payment systems should be clearly defined.Open process for formulating and reporting decision
48. Regarding an open process for policy formulation, the BoC has taken the lead—as mandated in the Payment Clearing and Settlement Act—in the policy process leading to the new large-value settlement system LVTS, by issuing a series of discussion papers and guiding the debate on the new system. Also, the BoC has issued and disclosed guidelines on what criteria would be applied for designation, and all designation decisions are published in the Gazette. A thorough consultation process has preceded the introduction of the new framework for oversight of clearing and settlement systems. Currently, progress is reported through speeches by senior officials and the BoC's annual report; however, the BoC is considering preparing a report on its oversight activities. Speeches by senior officials and technical papers—including on the conduct of monetary policy under LVTS—contributed to a broader understanding of the new operating framework.
49. Assessment: Fully consistent with the Code.Public availability of information on supervision policies
50. The Bank has published a "Guideline Related to Bank of Canada Oversight Activities under the Payment Clearing and Settlement Act". It has also spearheaded a discussion on the newly implemented LVTS, including through discussion papers of the Payments System Advisory Committee. Additional information on policy principles has been disclosed through speeches by senior officials of the Bank of Canada.
51. Assessment: Fully consistent with the Code.Accountability and assurance of integrity
52. See section on accountability and assurance of integrity under Transparency in Monetary Policies.
53. Assessment: Fully consistent with the Code.Deposit insurance Background and overview
54. The Canada Deposit Insurance Corporation (CDIC) is the federal agency created in 1967 by an Act of Parliament for the purpose of protecting depositors against the loss of their deposits placed with banks, trust companies and loan companies, in the event of their failure. CDIC membership is restricted to banks and trust and loan companies (either federally or provincially incorporated). It currently has 111 members. CDIC is an important component of the financial safety net in Canada.
55. The Canada Deposit Insurance Corporation Act (CDIC Act) provides that CDIC be instrumental in the promotion of standards of sound business and financial practices for its member institutions and have a role in the resolution of problem member institutions.
56. CDIC introduced a new risk-based fee structure in March 1999; this was widely disseminated and publicly disclosed. CDIC discloses detailed information on the nature, form and funding of the insurance. Both the CDIC Act and the by-laws are publicly available. In addition, it requires that member institutions make information available for distribution to its clients. CDIC members must have CDIC brochures available explaining coverage, as well as a register that details which products are covered—the latter is now also available through the Internet. CDIC also has toll-free telephone lines for consumer inquiries.Clarity of roles, responsibilities, and objectives
57. CDIC's legislated responsibilities are to provide insurance against the loss of part or all of deposits; and to be instrumental in the promotion of standards of sound business and financial practices for member institutions and to promote and otherwise contribute to the stability of the financial system of Canada; both objectives are to be pursued in such a manner so as to minimize the exposure of the Corporation to loss. The authority to conduct financial policies is embedded, among others, in the powers attributed to the CDIC (section 10) and the authority to make by-laws (section 11 (2)). Set out in the CDIC Act and incorporated into the CDIC's mission statement, the broad objective of CDIC are widely disclosed and explained in public.
58. As the deposit insurer, CDIC engages in a broad ranges of activities in order to minimize its exposure to loss, although it has no direct supervisory role in supervising compliance with the applicable financial institutions legislation except for the CDIC Act. CDIC does not typically perform examination if its member institutions and relies on OSFI to provide it with information. Under provisions of the Co-operative Credit Association Act, CDIC is empowered to make short-term loans, for liquidity purposes and on secured basis, to cooperative credit societies and to provincially created corporations that provide or administer stabilization or liquidity funds for the benefits of credit unions and their members.
59. Assessment: Fully consistent with the Code. An audit has found little or no overlap between CDIC's Standards and OSFI Guidelines. The Policy paper is addressing the issue by streamlining and facilitating compliance and increasing coordination between OSFI and CDIC to minimize the reporting burden on institutions.Open process for formulating and reporting decision
60. Both the regulatory framework and the operating procedures are readily available to the public, and explained in the Annual Report and information bulletins. Parameters for cooperation are outlined in the Act and in guidelines, e.g., OSFI does the annual inspections on behalf of CDIC. CDIC and OSFI have a Strategic Alliance Agreement that includes information sharing.
61. As a matter of course, any government statute of policy intent is accompanied by a consultation period, and preceded by a broad consultative process. In addition, parliamentary commissions also hold public consultations on legislative initiatives. Regulations also require a consultation process before promulgation. The consultation period is a function of the complexity and degree of controversy surrounding the issue. The recently decided new premium structure is an example of a substantive technical change in the structure of financial regulations.
62. Assessment: Fully consistent with the Code.Public availability of information on supervision policies
63. CDIC maintains public information services. CDIC's publication program includes the Annual Report and Corporate Plan (both required by legislation), news releases, information bulletins, brochures and fact sheets. The regulations for financial reporting are disclosed in the by-laws.
64. The Annual Report, which is published on a preannounced schedule, reports on the overall health and risk management of member institutions, as well as on adherence to CDIC standards. It also contains limited aggregate data; however, this information is widely available elsewhere. The financial statements, including operating expenses and revenue in the balance sheet, are part of the Annual Report, In addition, the Annual Report also contains information on recoveries on assets taken over from failed institutions. The Chairperson gives speeches and interviews, and these are released to the public.
65. Assessment: Fully consistent with the Code.Accountability and assurance of integrity
66. CDIC is ultimately accountable, through the Minister of Finance, to the Parliament for the conduct of its affairs. To this end, CDIC issues an Annual Report to the Minister of Finance, who then presents the Report to the Parliament. CDIC also completes a Corporate Plan on an annual basis.
67. As a Crown Corporation, the CDIC must disclose audited financial statements; this is done in conjunction with the publication of its Annual Report. The CDIC Act specifies that the auditor is the Auditor General of Canada. The accounting procedures follow Generally Accepted Accounting Practices, which is noted in the Annual Report. The financial statements are audited annually. The financial statements are disclosed within 3 months of the end of the fiscal year.
68. As officials of a Crown Corporation, officials act on behalf of the Government, and are responsible to Government. The Chairman is required to report to the Minister of Finance by virtue of the Minister's responsibility for the Canadian financial sector. In addition, the Chairperson and other senior officials may be called upon to testify before parliamentary committees on an ad hoc basis.
69. CDIC has conflict of interest guidelines for employees and directors of the Corporation. In addition, the government's ethics councilor reviews all appointments to the CDIC Board of Directors.
70. Assessment: Fully consistent with the Code.
2/ BC: Broadly compliant
3/ NC: Non-compliant
1 The work of the mission was coordinated by an FSAP team led by Mr. V. Sundararajan (IMF). Messrs. Karl Driessen and Charles Siegman (both IMF) were the principal contributors to this module.
2 The Basel Core Principles were issued in September 1997; a Core Principles Methodology was released in October 1999 by the Basel Committee on Banking Supervision. The Code of Good Practices on Transparency was adopted by the Interim Committee in September 1999; work on a supporting document is in progress. The IOSCO Objectives and Principles were issued in September 1998, and a detailed self-assessment methodology is being developed. A draft of the Core Principles for Systemically Important Payment Systems was issued for public comment in December 1999. The IAIS Insurance Supervisory Principles were issued in September 1997; a self-assessment program has been developed to assist member countries in evaluating compliance.
4 For a more detailed description of the monetary policy framework used by the BoC, see Donna Howard, "A Primer on the Implementation of Monetary Policy in the LVTS Environment", in Bank of Canada Review, Autumn 1998.
5 Transparency in monetary policy has also become a focus of the BoC research program. A recent research paper ("Greater Transparency in Monetary Policy: Impact on Financial Markets" by Phillippe Muller and Mark Zelmer, Bank of Canada, Technical Report No. 86, August 1999) examines whether the greater transparency employed by the BoC has improved financial markets' understanding of the conduct of monetary policy. The empirical results suggest that the BoC efforts at increasing transparency appear to have improved the efficiency of markets by facilitating more rapid adjustment in interest rates and the exchange rate.
6 The Monetary Policy Report, Bank of Canada, November 1999, contains a discussion of current economic and financial developments (including the inflation rate, exchange and interest rates), the outlook for inflation and the key underlying assumptions of inflation forecasts.
7 The mission discussed transparency practices of financial agencies in the securities sector with the Commission des valeurs mobilières du Québec (CVMQ) and the Ontario Securities Commission. These commissions oversee the activities of the Toronto and Montreal stock exchanges, which together account for the bulk of securities activity in Canada.