Federally-regulated pension funds using derivatives will soon have a set of best practices they’re required to follow. The Office of the Superintendent of Financial Institutions (OSFI) issued for comment a revised draft of derivatives guidelines – “Derivatives Sound Practices for Federally Regulated Private Pension Plans (Draft Guideline).” The guidelines are meant to replace existing guidelines in place since 1997 with enhanced guidance around how best to monitor and manage the use of derivatives.
Key focus areas of the new guidelines include risk management, types of risk and risk mitigation techniques, market risk, counterparty credit risk, liquidity risk, operational risk, indirect investment in derivatives, and stress testing.
OSFI is seeking questions and comments on the draft guides – you can find out more here.