Turning to the regulator’s role, Routledge stressed that it does not aim to steer innovation among financial institutions, but to safeguard the system.
“Our role is to promote safety and soundness, while allowing federally regulated banks to compete and take reasonable risks,” he explained. “But we need to keep the door open to innovation. If Canada falls behind in financial sector innovation, we risk falling behind economically. The better path is responsible innovation inside the regulated perimeter.”
On the subject of artificial intelligence, Routledge described it as a “productivity multiplier” for both regulated entities and OSFI itself and that, similar to the internet, it will rapidly change how financial services operate.
“A poorly managed AI model, especially one used in critical decision-making, could even contribute to an institution’s failure. That’s why governance, oversight, and accountability are so important,” he said.
The OSFI chief outlined four pillars of OSFI’s approach – Explainability, Data, Governance and Ethics -collectively known by the acronym “EDGE”.