Financial Services Commission of Ontario Statement of Priorities

June 2006, Toronto — The Financial Services Commission of Ontario (FSCO) is a regulatory agency established under the Financial Services Commission of Ontario Act, 1997 (FSCO Act).

Section 11 of the FSCO Act requires FSCO to deliver to the Minister of Finance and publish in the Ontario Gazette (by June 30th of each year), “a statement setting out the proposed priorities of the Commission for the fiscal year in connection with the administration of this Act and all other Acts that confer powers on or assign duties to the Commission or the Superintendent.”

This is FSCO’s ninth Statement of Priorities. It identifies key challenges facing FSCO, outlines proposed strategic priorities for the coming year and notes recent progress on significant projects.

FSCO is comprised of three parts: the five-person Commission or Board; the Superintendent of Financial Services and staff; and the Financial Services Tribunal. FSCO regulates insurance, pension plans, loan and trust companies, credit unions/caisses populaires, mortgage brokers and co-operative corporations in Ontario.

As of March 1, 2006, FSCO regulated or registered 402 insurance companies, 7,881 pension plans, 239 credit unions and caisses populaires, 51 loan and trust companies, 947 mortgage brokers, 1,767 co-operative corporations, as well as approximately 35,446 insurance agents, 3,806 corporate insurance agencies and 1,208 insurance adjusters. The regulated sectors represent a large, dynamic and evolving industry that plays a vital role in the provincial economy and the financial security of individuals and families.

Our Mandate

To protect the public interest and enhance public confidence in the regulated sectors, FSCO provides regulatory services that protect financial services consumers and pension plan beneficiaries, and support a healthy and competitive financial services industry.

Our Vision

We are committed to being a vigilant, fair-minded and forward-looking regulatory agency with a constructive and responsive presence in Ontario’s financial services marketplace.

Key Challenges

FSCO engages in planning exercises to identify current and future strategic priorities to better direct FSCO’s activities toward the achievement of its objectives. For this process to be effective, it cannot take place without consideration of external factors affecting the financial services industry. FSCO continues to take into account the following key challenges in the environment.

Convergence and structural change

There is a continuing trend toward consolidation and mergers of financial institutions, globalization of the marketplace and convergence of the financial services industry. Increasingly, initiatives exist within national and multi-national firms to provide a broad range of in-house financial products such as loans, wealth management and insurance. Often these products are subject to different regulatory regimes. This trend challenges financial services regulators to address issues facing the financial services industry using a cross-jurisdictional, cross-sectoral approach.

Market conditions

Rising costs, increased competition and changing demographics are just a few of the factors influencing market conditions and affecting the fiscal outlook of financial institutions and pension plans. As the baby boom generation retires, there will be increasing focus on retirement and pension issues. Consumers and pension plan beneficiaries also continue to express concern about the implications of fluctuating market conditions. Recent periods of variable investment returns coupled with low long term interest rates have negatively impacted the solvency of many pension plans. The cyclical nature of the insurance industry, meanwhile, can result in periods of premium increases, followed by intervals of price softening. As a result, consumers and pension plan beneficiaries can find themselves subject to market forces over which they have little control. To address these concerns, it is essential that regulators have a thorough understanding of market realities to effectively manage and measure risk, anticipate changes in market conditions and respond effectively to them.

Evolving regulatory environment

Regulators need to keep pace with, and have adequate regulatory instruments to respond to, the changing regulatory environment. A number of initiatives are underway to streamline legislative and regulatory structures to align the regulation of financial services with evolving market realities. In pursuing this objective, FSCO will also need to respond to any changes that may occur in the regulatory systems for financial services not regulated by FSCO. By adequately regulating and supervising financial institutions, FSCO enhances public confidence in Ontario’s financial institutions and pension plans, a key factor in determining Ontario’s current and future economic success.

Impact of technological change

Emphasis on electronic communication in Canadian society, and globally, requires that regulators be equipped to conduct business with stakeholders electronically and provide information and services to consumers and pension plan beneficiaries online. Similarly, the growth in the volume of data available to FSCO from stakeholders requires investment in a sustainable infrastructure that allows FSCO to effectively manage this information to support decision making, service delivery and the achievement of its strategic priorities.

What this Means to FSCO

To meet these challenges FSCO is guided by established strategic priorities. These priorities build on the delivery of the core business activities FSCO carries out to achieve its mission. As each is significant, FSCO’s strategic priorities are not ranked in any particular order:

  • I. Promote a coordinated national approach to regulatory issues.

  • II. Enhance the risk-based approach to regulation.

  • III. Review and recommend amendments to the regulatory framework to keep up with changes in the marketplace.

  • IV. Improve delivery of services.

FSCO believes these strategic priorities and their associated initiatives, which are outlined on the following pages, will have a positive impact on consumers and pension plan beneficiaries. The pursuit of these priorities allows FSCO to fulfill its mandate to protect financial services consumers and pension plan beneficiaries and support a healthy and competitive financial services industry in Ontario.

That said, FSCO cannot achieve its goals alone. To fulfill its mandate, FSCO has adopted a culture of partnership and dialogue. FSCO continues to benefit from strong collaboration with consumers, industry and other stakeholders. For this reason, most projects undertaken by FSCO are complex, involving many participants and requiring implementation in conjunction with federal and provincial jurisdictions. As a result, many initiatives span several years, with work continuing on an ongoing basis.

Technology plays an important role in helping FSCO maintain strong connections with stakeholders and provide information and services to them. To this end, FSCO has embraced all aspects of e-communications, conducting business with industry electronically and offering consumers online access to services and information. FSCO believes that with improved access to information, consumers and pension plan beneficiaries will be better equipped to make wise choices and protect their interests.

For the full report, view http://www.fsco.gov.on.ca/english/pubs/priorities/SoP-June_06.pdf.

For more information about FSCO, visit http://www.fsco.gov.on.ca/t.