Office of the Superintendent of Financial Institutions
The purpose of this letter is to inform you that, following its semi-annual review, OSFI has decided to maintain the level of the Domestic Stability Buffer at 1.00% of total risk-weighted assets, as calculated under the Capital Adequacy Requirements (CAR) Guideline.
March 13, 2020, outside of the scheduled semi-annual announcements, OSFI communicated its decision to set the buffer at 1.00% in response to the challenges posed by COVID-19 and market conditions. OSFI indicated that no increases to the buffer would take effect for at least 18 months from that date.
The decision to maintain the buffer at 1.00% reflects OSFI's view that the reduction in March has been effective, supported by fiscal and monetary policy responses as well as regulatory policy adjustments. At the same time, vulnerability levels remain elevated against a backdrop of heightened uncertainty. In this context, OSFI remains ready to further release the buffer should conditions warrant.
Specific vulnerabilities covered by the buffer continue to include: (i) Canadian consumer indebtedness; (ii) asset imbalances in the Canadian market; and (iii) Canadian institutional indebtedness. In addition, global vulnerabilities continue to contribute to the possibility of a spillover of external risks into the Canadian financial system.
The Domestic Stability Buffer applies only to those federally regulated financial institutions designated as Domestic Systemically Important Banks (D-SIBs)Footnote 1.
The Domestic Stability Buffer level is maintained at 1.00% of risk-weighted assets.
As of June 2020, the following federally regulated financial institutions are designated as Domestic Systemically Important Banks:
Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and Toronto-Dominion Bank.
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