Office of the Superintendent of Financial Institutions
For Immediate Release
OTTAWA ─ June 17, 2021 ─ Office of the Superintendent of Financial Institutions
Today, OSFI announced that the Domestic Stability Buffer (DSB) — a policy tool that helps ensure the stability of Canada’s financial system—will be set at 2.50% of total risk-weighted assets. This is an increase from its current level of 1.00%.
The DSB was lowered to 1.00% in March 2020 in anticipation of a period of economic disruption due to the COVID-19 pandemic. This lower DSB level provided capacity for Canada’s Domestic Systemically Important Banks (D-SIBs) to absorb potential losses and continue to supply credit to the economy.
OSFI’s view is that a DSB set at 2.50% is prudent given today’s environment, where key vulnerabilities such as household and corporate debt levels remain elevated—and in some cases have increased since March 2020. At the same time, the economic and market disruptions stemming from the pandemic have abated and banks’ capital levels have been resilient. These conditions support today’s decision to rebuild the buffer.
The DSB continues to support an effective capital regime, one where banks set aside capital in response to systemic vulnerabilities, while still having capacity to lend to creditworthy households and businesses to support the economic recovery.
Consistent with OSFI’s March 2020 commitment not to increase the DSB level for 18 months, this change will take effect on October 31, 2021.
OSFI remains committed to setting the DSB in a transparent manner to ensure it is widely understood by market participants. As always, we will continue to monitor the environment closely and make further adjustments to the DSB as conditions warrant.
“Today’s decision to set the DSB at 2.5% reinforces the stability of Canada’s financial system, while preserving its ability to lend to Canadian households and businesses and support the economic recovery.”Jamey Hubbs, Assistant Superintendent, Deposit-Taking Supervision Sector, OSFI
“Today’s decision to set the DSB at 2.5% reinforces the stability of Canada’s financial system, while preserving its ability to lend to Canadian households and businesses and support the economic recovery.”
Jamey Hubbs, Assistant Superintendent, Deposit-Taking Supervision Sector, OSFI
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