OSFI keeps Domestic Stability Buffer at 2.50%, provides update on review
News release - Ottawa -
The DSB applies to Canada’s largest banks – known as Domestic Systemically Important Banks, or D-SIBs – and is part of a comprehensive supervisory and capital regime that encourages D-SIBs to build capital resilience to vulnerabilities. Keeping the DSB at 2.50% reflects OSFI’s assessment that systemic vulnerabilities remain elevated and have increased, while near-term risks are moderate but rising given an environment of heightened uncertainty.
In this context, we expect D-SIBs to exercise vigilance and heightened prudence in their capital management practices with a view to preserving capital.
As part of OSFI’s work to ensure the long-term effectiveness of the capital regime, OSFI is reviewing the DSB, including its design and range, as previously communicated. We expect to complete this work in the fall 2022.
OSFI continues to monitor economic and financial conditions as well as risks and vulnerabilities to the banking system and may take further action should conditions warrant.
“Since its creation in June 2018, the DSB has proven its effectiveness as a counter-cyclical capital buffer that can be released and used by banks to absorb losses and continue to provide loans to Canadians. Keeping the DSB at 2.5% of total risk-weighted assets is a sound and prudent decision, given increasing vulnerabilities driven primarily by historically elevated Canadian household indebtedness and potential asset price imbalances.”
- Jamey Hubbs, Vice-Superintendent, OSFI
- The DSB is an important policy tool that helps ensure the stability of Canada’s financial system and requires Canada’s largest domestic systemically important banks (D-SIBs) to build up a capital buffer as vulnerabilities grow.
- This buffer can then be released during challenging times, allowing banks to cover losses and continue to lend to businesses and households.
- OSFI reviews and sets the DSB level every June and December, but can make changes at other times as circumstances warrant.