By Christine Dobby
(Bloomberg) — Canada’s financial regulator left capital requirements unchanged for the country’s largest banks, pointing out that the lenders are sitting on a combined $60 billion in excess capital that could be deployed to boost economic activity.
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, signaling it believes systemic risks to the financial system are stable despite looming uncertainty with the North American free-trade deal up for review next year.
Canada’s six biggest banks must continue to have Common Equity Tier 1 capital of at least 11.5% of risk-weighted assets. They all comfortably exceed that ratio, with an average CET1 ratio of 13.6% reported in fiscal fourth-quarter earnings.
That means they have $60 billion more than the regulatory minimum, Peter Routledge, superintendent of financial institutions, told reporters on Thursday, adding that OSFI believes the lenders have “ample capacity to continue to grow and profit from their growth.”
It’s up to the banks’ boards and management teams to decide whether to use that excess capital to make more loans, he said.
“Ultimately, institutions determine how to allocate the capacity provided by their capital cushions,” Routledge said, noting that one of those choices may include “the provision of credit for Canadian businesses, including small- and medium-sized businesses, as they adapt to current conditions.”
Earlier this year, OSFI 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, but they won’t be finalized until late next year.
Routledge said the stability buffer has a different function than sector-specific risk weightings, taking into account risks across the whole system and economy.
The stability buffer is often compared to a rainy-day fund, intended to protect the financial system by ensuring lenders have enough capital 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.
“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.”
Routledge said OSFI does not expect to increase the buffer from its current level “absent a significant change in vulnerabilities.”
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 wildcard hanging over the country’s economy is next year’s renegotiation of the U.S.-Mexico-Canada trade agreement.
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Last modified: December 19, 2025
