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The regulator overseeing Canada's banking system is increasingly stretched and could find it hard to attract enough competent staff to do its job properly, Parliament's official watchdog said on Tuesday.
Auditor General Sheila Fraser said in a report that the Office of the Superintendent of Financial Institutions (OSFI) adequately supervised the banks at present.
"However, the growing volume and complexity of its work is increasing the demands on its human resources," she wrote, noting an ever larger number of complex financial products.
"This challenge, combined with pressures on training and compensation, could affect the office's ability to attract and retain qualified staff to maintain its capacity and competency to carry out its supervisory mandate."
Thanks in part to tight supervision and a more conservative banking culture, the banks survived the global economic recession with relatively few problems. Canada's big banks are among the world's best capitalized.
The country's big six banks are: Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada.
Executives from the banks told Fraser's team that they felt OSFI was a strong supervisor and said the relationship worked well. Yet they also noted OSFI was having trouble reviewing the banks' capital models because of their complexity.
Fraser said the time for training was limited, which could mean OSFI staff might not be exposed to the latest financial market innovations.
Fraser said that, as of March 10 this year, 10 percent of positions on large bank supervisory teams and 12 percent of jobs on the specialist groups that support the teams were vacant. Half the positions have been open for a year.
She cited OSFI as saying there "was little flexibility to address unexpected events" and said the time taken to deal with documents resulted in less time available for detecting and analyzing risks.
In an official response to Fraser, OSFI said it was looking at ways of boosting salaries and training.
Fraser found that OSFI, working with the federal Finance Department and others, regularly and quickly shared important information during the global financial crisis.
But she noted that the Finance Department was not in the habit of regularly reviewing the regulatory framework to ensure it was relevant.