The Office of the Superintendent of Financial Institutions (OSFI) has released its final guideline with respect to the governance of Canadian chartered federally regulated financial institutions (FRFIs). The guideline, which applies to nearly 400 federally regulated Canadian financial organizations, covers the role of the board of directors, including responsibilities and a definition of board effectiveness, and risk governance, including risk appetite, says a Towers Watson ‘Client Advisory.’ It builds on OSFI’s 2009 initiative by requiring boards of directors to review and discuss the organization’s compensation policy for all human resources for consistency with the Financial Stability Board’s (FSB) Principles for Sound Compensation Practices (FSB Principles). While most large FRFIs are largely in compliance with the principles, a number of medium and small organizations will likely have to re-examine their compensation practices and board policies. With the May 1 deadline approaching, organizations will need to ensure they have reviewed the governance issues appropriately consistent with the scope of the guideline and in keeping with the spirit of the underlying principles.
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