Canada's bank executives must manage culture risk, regulator says
Canada’s banking and insurance regulator said it expects executives and boards to be accountable for their company culture, and it’s beefing up its rules on how to do that.
The Office of the Superintendent of Financial Institutions (OSFI) released a regulatory notice on “culture risk management” — a document that outlines what boards and senior managers must do to stamp out behaviour that can “weaken a financial institution’s safety, soundness, integrity and security.”
Risk management and corporate culture have been in the spotlight for Canadian banks after Toronto-Dominion Bank was fined US$3.1 billion and pleaded guilty to criminal charges related to its failure to stop money laundering by drug cartels and other criminals in the United States.
Prosecutors said the bank failed for a decade to root out suspicious activities as required under U.S. anti-money-laundering laws, due in part to a lax culture that sought to limit spending on compliance systems. The No. 2 Canadian bank is now facing years of restrictions on the size of its U.S. operation as it works to repair those systems.
OSFI’s regulatory notice emphasizes that all of senior management is responsible for ensuring sound governance and a culture of compliance — including chief executives, their direct reports and the heads of major business units and oversight functions.
“It’s not just the business of chief compliance officers to make sure — although they play a very key role — that regulatory requirements in Canada and abroad are complied with,” Tolga Yalkin, OSFI’s assistant superintendent of regulatory response, told reporters.
Yalkin declined to speak about specific institutions or cases, saying the regulator’s notice was finalized in response to
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