Backgrounder: Final Capital Adequacy Requirements Guideline (2026)

Overview

Today the Office of the Superintendent of Financial Institutions (OSFI) published the final revisions to the Capital Adequacy Requirements (CAR) Guideline. These revisions reflect stakeholder comments received during a 60-day public consultation held from February 20 to April 22, 2025. OSFI also made corresponding revisions to the Small and Medium-Sized Deposit-Taking Institutions (SMSB) Capital and Liquidity Requirements Guideline.

The final CAR Guideline revisions include:

• the treatment of certain U.S. government-sponsored entities (GSE) to better align with their regulatory treatment in the U.S.
• implementation considerations related to the treatment of Combined Loan Products (CLP) where multiple lending products are secured by the same property, and are providing banks with 18 months to implement any required changes into their internal models.
• market risk capital rules to improve alignment with the credit risk capital treatment of sovereign exposures. Sovereign exposures refer to a financial institution's exposure to a country's government or its central bank, for example through government bonds, treasury bills, or other loans made to a sovereign entity.

The CAR Guideline published today also notes that increases to the Basel III standardized capital floor level for Canadian banks are deferred until further notice, as announced by the Superintendent in February 2025.

To ensure consistent application of the guidance, OSFI has clarified the capital expectations around classifying mortgages it has had in its Capital Adequacy Requirements guideline since 2023. This clarification affects the way capital is calculated within financial institutions. It does not affect how mortgages are underwritten.

Why it's important

The CAR Guideline is aimed at supporting the financial resilience and stability of deposit-taking institutions. It ensures financial institutions have adequate capital to cover Canadians' deposits even if financial institutions' expectations regarding the loans or investments they have made aren't borne out.

If banks have too little capital to absorb potential losses from the risks they take, it puts depositors' money at risk. Insufficient capital across the financial system can, in bad times, trigger economy-wide financial instability and cause problems for a country's financial system. The global financial crisis in 2007 is an example.

This guidance applies to how institutions calculate capital requirements—not to borrower qualification. It does not affect how rental income is used to qualify borrowers under Guideline B20. This means that financial institutions can continue using rental income to underwrite mortgage applications, including for investor-owners with multiple properties.

Implementation

The CAR Guideline (2026) will take effect on November 1, 2025, or January 1, 2026 for institutions with a fiscal year ending October 31 or December 31, respectively.