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CLHIA comments on OSFI Draft Guideline E-22


Release Date: 11/26/2015
Staff Reference: James Wood

November 26, 2015

Mr. Patrick Tobin
Capital Specialist, Bank Capital
Office of the Superintendent of Financial Institutions Canada
255 Albert Street
Ottawa, Ontario K1A 0H2

Dear Mr. Tobin:

Re: OSFI Draft Guideline E-22 – Margin Requirements for Non-Centrally Cleared Derivatives

We appreciate the opportunity to provide comments on OSFI draft Guideline E-22 Margin Requirements for non-centrally cleared derivatives.

Established in 1894, the Canadian Life and Health Insurance Association (CLHIA) is a voluntary trade association that represents companies which together account for 99 per cent of Canada’s life and health insurance business. The industry, which provides employment to about 150,000 Canadians and has assets in Canada of over $721 billion, protects about 28 million Canadians through products such as life insurance, annuities, registered retirement savings plans, disability insurance and supplementary health plans. It pays benefits of almost $84 billion a year to Canadians and manages about two-thirds of Canada’s pension plans. Canadian life insurance companies participate as end-users in Canadian and foreign derivatives markets.

Generally speaking, we think that OSFI is on the right track with draft Guideline E-22. We understand that the guidance aims to mitigate systemic risk in the financial sector and promote central clearing of derivatives where practicable. We agree that it is preferable for OSFI to create a guideline which contains the margin requirements that OSFI would use to ensure the mitigation of systemic risk in the derivatives market and promotes central clearing rather than to simply rely on the Basel Committee on Banking Supervision-International Organization of Securities Commissions (BCBS/IOSCO) framework. We believe that it is helpful for Canadian financial institutions to be provided with guidance on OSFI’s application and expectations surrounding the margin requirements, in a Canadian context...