OSFI keeps stability buffer for Canada's biggest banks unchanged
Canada’s top banking regulator held the domestic stability buffer (DSB) at 3.5 per cent on Tuesday after a review of the “rainy day” funds the country’s largest banks must keep aside to absorb unexpected financial shocks.
The decision to hold the DSB at its current level suggests that the vulnerabilities and risks facing Canada’s financial system remain “generally stable and systemically important banks have maintained an adequate level of capital to address emerging risks,” the Office of the Superintendent of Financial Institutions (OSFI) said in a statement on Tuesday.
“Our decision to hold the DSB at its current level reflects the resilience of systemically important banks to absorb losses from unanticipated downside shocks and maintain the critical services they provide to Canadians,” Peter Routledge, the superintendent of financial institutions, said in the statement.
OSFI requires Canada’s Big Six lenders to maintain a capital buffer so that they can continue lending to households and businesses during periods of financial stress. The DSB is measured as a percentage of the banks’ risk weighted assets such as mortgages or credit card loans.
Routledge said at a press conference on Tuesday that he is confident that the banking system has the resilience to operate through the uncertainty stemming from incoming U.S. president Donald Trump’s threat to impose a 25 per cent tariff on Canadian goods.
“We’d be remiss if we weren’t looking at what the uncertainty was and how it might affect the banks,” he said. “We think the system has resilience to operate through quite handily…. I don’t mean to say we’re not taking this very seriously, but we have confidence in the financial system’s resilience, because we built a bunch of
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