OSFI holds Domestic Stability Buffer at 3.5%

Today, the Office of the Superintendent of Financial Institutions (OSFI) announced that the Domestic Stability Buffer (DSB) will remain at 3.5% of total risk-weighted assets. This level was announced in June 2023 and has been in effect since November 1, 2023.

The DSB applies to Canada’s six biggest banks, also known as Domestic Systemically Important Banks (D-SIBs).

Holding the DSB at its current level reflects OSFI’s assessment that vulnerabilities, such as high household debt, remain elevated but stable, while near-term risks continue to be low despite some recent increase. Future mortgage renewals at higher interest rates remain a concern, while commercial real estate lending and geopolitical conflicts continue to contribute to economic uncertainty.

Through the DSB, OSFI requires D-SIBs to set aside capital that may then be used to offset any potential shocks during challenging times. OSFI will continue to monitor risks to D-SIBs and stands ready to act if changes to the DSB level are needed.

OSFI further expects these institutions to hold their total Common Equity Tier 1 (CET1) ratio to at least 11.5% of risk-weighted assets.

More information about OSFI’s decision can be found in the Decision Summary Note.

Quote

D-SIBs must continue to exercise sound judgement in capital management. The DSB is not a substitute for prudent capital management and all institutions must have strong capital risk-management plans in place. We continue to monitor the environment closely and are ready to make further adjustments to the DSB as conditions warrant.