Building resilience: OSFI sets Domestic Stability Buffer level at 1.75%

News Release

For Immediate Release

OTTAWA ─ December 12, 2018 ─ Office of the Superintendent of Financial Institutions

Today the Office of the Superintendent of Financial Institutions (OSFI) set the level for the Domestic Stability Buffer at 1.75% of total risk-weighted assets, effective April 30, 2019.

Similar to how people save money for unexpected events, banks set aside capital so they can continue to operate and provide services to Canadians should economic conditions deteriorate.

An effective capital regime ensures that banks are holding adequate capital to protect against risks to the financial system, while also encouraging them to use their buffers during times of stress to avoid asset-sales or drastic reductions in lending.

While Canada is currently in the midst of a favourable credit environment with a stable domestic economy, household debt levels continue to be high relative to incomes and uncertainty persists in some housing markets. Corporate indebtedness is also growing, representing a potential future risk.

Recently, in discussing vulnerabilities in the global financial system, the Financial Stability Board remarked that financial supervisors like OSFI should “consider using the current window of opportunity to build resilience, particularly macroprudential buffers where appropriate.

As OSFI noted in its June 2018 letter, OSFI is of the view that increased transparency will support banks’ ability to use this capital buffer in times of stress by increasing understanding of the purpose of the buffer and how it should be used.

Quote

“In light of positive credit performance and generally stable economic conditions, now is a prudent time for banks to build resilience against future risks to the Canadian financial system,” said Jamey Hubbs, Assistant Superintendent, Deposit-Taking Supervision Sector.

Quick Facts

  • The Domestic Stability Buffer applies only to those federally regulated financial institutions designated as Domestic Systemically Important Banks (D-SIBs).
  • OSFI reviews and sets the level of the Domestic Stability Buffer in June and December of each year based on its ongoing monitoring of the Canadian financial system and the entities it regulates, and in consultation with its federal regulatory partners.

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About OSFI

The Office of the Superintendent of Financial Institutions (OSFI) is an independent agency of the Government of Canada, established in 1987, to protect depositors, policyholders, financial institution creditors and pension plan members, while allowing financial institutions to compete and take reasonable risks.

Media Contact

Annik Faucher
OSFI − Public Affairs
annik.faucher@osfi-bsif.gc.ca
613-949-8401

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