Office of the Superintendent of Financial Institutions
For Immediate Release
OTTAWA ─ December 8, 2020 ─ Office of the Superintendent of Financial Institutions
Today, OSFI announced that the Domestic Stability Buffer (DSB) will remain at 1% of total risk-weighted assets, unchanged from the level set on
March 13, 2020 and maintained in the
June 23, 2020 DSB announcement.
Maintaining the buffer at 1% reflects OSFI’s view that the DSB reduction in March continues to be effective and appropriate given the current balance of vulnerabilities and risks in the environment.
The release of the DSB in March signaled clearly to banks and to market participants that using their capital buffers would be an appropriate and prudent response to a downturn in the economy. This response supported the resilience of the banking system by allowing banks to absorb losses while continuing to provide loans to creditworthy households and businesses.
Throughout the pandemic, Canada’s banks have demonstrated resilience and have continued to provide loans to support borrowers while maintaining robust capital levels. A well-capitalized banking system supports financial stability because it helps to cushion, rather than amplify, financial shocks.
Vulnerabilities in the financial system remain elevated but stable against a backdrop of ongoing uncertainty. OSFI continues to monitor several key vulnerabilities including Canadian household and corporate indebtedness, asset imbalances, as well as the evolution of the pandemic and its impact on economic recovery.
OSFI will continue to monitor economic and financial developments and remains ready to release the buffer further should conditions warrant.
“The Canadian banking system was well prepared for this crisis. We expect that any decision to decrease or draw on buffers when needed will be seen as a normal course stabilizing action, and a sign of a well-functioning and effective capital regime.”- Jamey Hubbs, Assistant Superintendent, Deposit-Taking Supervision Sector
“The Canadian banking system was well prepared for this crisis. We expect that any decision to decrease or draw on buffers when needed will be seen as a normal course stabilizing action, and a sign of a well-functioning and effective capital regime.”
- Jamey Hubbs, Assistant Superintendent, Deposit-Taking Supervision Sector
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. OSFI supervises more than 400 federally regulated financial institutions and 1,200 pension plans to determine whether they are in sound financial condition and meeting their prudential requirements.
OSFI – Public Affairs