By Christine Dobby

(Bloomberg) — Canada’s financial regulator left capital requirements unchanged for the country’s largest banks, signalling that it believes systemic risks to bank balance sheets remain stable despite the uncertain economic picture with the North American free-trade deal up for review next year. 

The Office of the Superintendent of Financial Institutions said in a statement Thursday that the domestic stability buffer will remain at 3.5% after its semi-annual review, the fifth consecutive hold. The regulator last boosted the buffer in June 2023.  

The stability buffer is often compared to a rainy-day fund, intended to protect the financial system by ensuring lenders have enough capital on hand to absorb losses in a downturn. OSFI lowered it in the early days of the pandemic to give banks more room to lend and help stimulate growth before raising it over time as the economy recovered.

Thursday’s decision means Canada’s banks will continue to be required to have Common Equity Tier 1 capital of at least 11.5% of risk-weighted assets. All six large banks comfortably exceed that ratio, with an average CET1 ratio of 13.6% reported in fiscal fourth-quarter earnings.

“The major vulnerabilities in the banking system remain elevated but stable,” OSFI said in the statement, pointing to high household debt relative to income but noting that the metric is below historical peaks. It also pointed to global uncertainty and geopolitical risks. “Canadian corporate debt growth has moderated but credit quality is vulnerable to trade-related headwinds.”

Peter Routledge, superintendent of financial institutions, said OSFI does not expect to increase the buffer from its current level “absent a significant change in vulnerabilities.” 

“We continue to closely monitor existing vulnerabilities and risks, including still elevated and increasing household indebtedness, uncertainty in housing and commercial real estate, and some signs of strain in credit such as gradually rising delinquencies and provisions in certain consumer and business segments,” Routledge said in prepared remarks. 

The Canadian economy has been moderately resilient in recent months, with inflation holding steady near the Bank of Canada’s target and the labour market exhibiting some strength with job gains and a declining unemployment rate. Gross domestic product rose at an annualized rate of 2.6% in the third quarter, a notable rebound from a contraction earlier in the year.

Credit trends appear stable, though the Big Six banks did put aside more money for possibly bad loans in their fiscal fourth quarter than they did in the previous period. The major wild card hanging over the country’s economy is next year’s renegotiation of the U.S.-Mexico-Canada trade agreement. 

OSFI has proposed easing some capital rules for certain corporate and real estate loans to encourage more lending to businesses. Those changes would see the regulator lower the risk weighting of those loans, which in turn would allow banks to lend more while holding the same amount of capital. 

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Last modified: December 18, 2025