ECON 460 Lecture Notes - Lecture 1: European Cooperation In Science And Technology
22 May 2018
School
Department
Course
Professor
January 31st --- OSFI Intro
Established in 1987 to contribute to public confidence in the Canadian financial system (in context of
bank failures).
---an independent agency reporting to Minister of Finance
---supervises and regulates over 400 banks and insurers, and some 1200 federally regulated private
pension plans
---huge impact on economy; banks are beneficial in the sense that they keep money in circulation;
compare with keeping money in your bed, putting in in a bank allows for it to be lent to others and
reate ore alue i the eooy aks reate oey → liquidity allows them to always have
eough o had as log as eeryoe does’t default at oe)
---regulatory areas: number of certain types of transactions, transaction risk, deposit ratio that must be
maintained (liquidity), deposit insurance (deposits under a ceiling amount are guaranteed in case of a
run on banks during a crash) etc.
Risk and information that is difficult to understand:
---when only a few experts can understand a policy, there is risk involved for bureaucrats who accept
these policies without fully understanding them
---some regulators will rule out policies that are too complex to be understood by people with a
moderate amount of expertise in the area; this is one way of managing risk
Ie subprime mortgages; bundles of sub-par loans which contributed to a market crash when people
discovered their true value, they were approved by a regulator who did not understand
Interpreting legislation (Office of the Superintendent of Financial Institutions Act)
---look at the table of contents for a long time; it helps you to situate yourself with respect to the whole
structure
---i the ase of the O“FI at, you ould e hopelessly ofused if you did’t uderstad right aay that
it is read in conjunction with the Bank Act and the Insurance Act; to avoid this, when understand an
agency look up their website to see which Acts they are responsible for administering
---purpose is a good setio to start; to esure regulatio of istitutions and pension plans so as to
otriute to puli ofidee i the Caadia fiaial syste 3.1 → this is tautological; the
purpose of this regie is to hae the aks uder a regie, it does’t tell you uh
---simplicity in acts delegating power is normal because the point is to give someone flexible power to
regulate; the more restrictive the language in the purpose section, the smaller and less important the
regulatory agency
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Established in 1987 to contribute to public confidence in the canadian financial system (in context of bank failures). --an independent agency reporting to minister of finance. --supervises and regulates over 400 banks and insurers, and some 1200 federally regulated private pension plans. --regulatory areas: number of certain types of transactions, transaction risk, deposit ratio that must be maintained (liquidity), deposit insurance (deposits under a ceiling amount are guaranteed in case of a run on banks during a crash) etc. Risk and information that is difficult to understand: --when only a few experts can understand a policy, there is risk involved for bureaucrats who accept these policies without fully understanding them. --some regulators will rule out policies that are too complex to be understood by people with a moderate amount of expertise in the area; this is one way of managing risk.
