Peter Routledge participates in a fireside chat at CCUA Regulatory Virtual Forum

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Geopolitical Environment and Resilience

Moderator:

Let's talk about the world we are living in right now. Tariffs and protectionism are increasing costs and uncertainty. Transnational crime is behind ever more sophisticated frauds and scams. Extreme weather events are increasing in frequency and impact. As much as we may wish it weren't, Canada and its financial sector are implicated by all of these risks.

How is OSFI working to mitigate the potential systemic risks to federally regulated financial institutions, including integrity and security risks, and in the evolving geopolitical environment?

Superintendent Peter Routledge:

• The world has changed on us in a pretty profound way. It's not the world that we want, but it's the world that we have to accept and address. The important thing is that Canada's financial system starts from a position of strength, with strong capital and liquidity across federally regulated institutions. At the same time, we are increasingly focused on how quickly risks such as geopolitics integrity and security, and fraud are evolving, and how interconnected they have become to have systemic impact on the stability of our financial system.
• We are sharpening our focus on the most significant risks and setting clearer expectations to our regulated entities through our Annual Risk Outlook, which is updated twice a year and available on our website. In the most recent edition published in April, we are prioritizing RESL and mortgage, NBFI and funding and liquidity risks, in addition the key risks including wholesale credit, AI, cyber, integrity and security, and third parties.
• We are pairing strong prudential fundamentals with more forward-looking supervision and stronger partnerships on integrity and security risks. Through earlier risk identification, horizon scanning, and the OSFI Threat Forum along with ongoing collaboration with Canada's security and intelligence community, we are improving collective awareness of emerging geopolitical, cyber, and financial crime risks.
• We think that a system that is more used to taking risks will be more resilient through this uncertainty. By setting clearer expectations through guidance, supervisory reviews, and targeted assessments, we are helping institutions prepare for threats that increasingly originate outside the financial system.

Financial Sector Consolidation and Competition

Moderator:

Canada's financial sector has experienced a lot of consolidation in the last decade. And credit unions have been a part of that story. Larger CUs have built an increasing share of assets while the total number of individual credit unions has declined. There are reasons behind this, including the need for economies of scale to compete with major banks and to fund expensive digital transformations. At the same time, many larger credit unions are looking to expand beyond their provincial borders. Some are pursuing federal continuance or combinations with existing federal credit unions, and others are looking for other opportunities to operate inter-provincially.

So here is OSFI. How much are you encouraging of consolidation versus being concerned about the potential impact on competition in the banking space? Where is the balance in your view?

Superintendent Peter Routledge:

• On federal continuance, we learned some important lessons in the early years. In some cases, our approach was too risk adverse, which delayed entry into the federal system for institutions with established customer franchises. We have since worked to make the process clearer, more predictable, and more streamlined, while maintaining strong prudential standards.
• Our role is not to direct commercial decisions, but to ensure institutions can enter the federal system and grow safely and soundly. We assess institutions based on their risk profile, governance, and operational readiness, while decisions around growth or consolidation remain commercial.
• The broader question is how consolidation shapes the resilience and competitiveness of the system. Credit unions play an important role in supporting competition and diversity in Canada's financial system, and how the sector evolves matters in that context.
• Scale can enhance competitiveness, but it also brings greater complexity. I worry a lot about fragmentation, and lack of scale in credit unions outside Quebec. As institutions grow, expectations around governance, capital, and risk management increase accordingly, and institutions need the capabilities to keep pace with their ambitions.
• With the launch of our streamlined approvals framework for targeted new entrants in late June, we are making the path to a federal licence more streamlined, clearer, and more predictable, while continuing to maintain strong prudential oversight.

Approach to Supervision to Support Growth and Innovation

Moderator:

We've talked about the rapidly changing risk environment. And we all know that risks are increasingly complex and interconnected. At the same time, risk does not affect all institutions equally. How is OSFI streamlining its regulatory framework to reduce unnecessary burden, and how does OSFI balance the pursuit of regulatory efficiency with the need to maintain resilience and public confidence in Canada's financial institutions, especially in a rapidly evolving risk environment?

Superintendent Peter Routledge:

• We are taking a more deliberate and risk-focused approach to supervision. Not all risks are equal, and not all institutions face the same risks. As highlighted in our latest Quarterly Release, available on our website, we are prioritizing credit, liquidity, governance, and integrity and security, while scaling expectations based on size, complexity, and risk profile.
• Proportionality is easy to say and hard to implement. We are actively enhancing regulatory efficiency by improving clarity through concrete actions. By streamlining our guidance library, it ensures regulatory expectations are clearer, targeted, and aligned with OSFI's mandate. We have removed over 600 pages from our website, in English and French combined, of redundant, obsolete or trivial information from our guidance library. In addition, through our new Credit Risk Management Guideline, we are consolidating existing expectations into a clearer, more coherent framework.
• We are also making our policy process more predictable and transparent. Our Quarterly Release and Industry Day model gives institutions advance visibility into consultations, guidance, and announcements, helping them plan and engage more effectively.
• This is about more than reducing burden. It is about maintaining a regulatory framework that supports participation, innovation, and resilience. Efficiency and resilience need to work together, and our approach is grounded in proportionality, with expectations that scale to an institution's size, complexity, and risk profile. We are open to our federal credit unions asking us for further customization.

New technologies (AI, Stablecoin, Financial Innovation)

Moderator:

New technologies and financial innovation–like AI, stablecoin, CBD or RTR–present both risks and opportunities for the financial system.

How does OSFI view the balance between permitting innovation while mitigating risk? And maybe taking that further, how is OSFI approaching artificial intelligence, both in its own supervisory work and in how it expects financial institutions to manage AI responsibly?

Superintendent Peter Routledge:

• We don't want to get in the way of innovation. It will happen with or without us, so the question is where it happens. Our objective is to support innovation within the regulated system, where risks can be better understood and managed.
• Our approach is to enable innovation without compromising safety and soundness. New technologies can improve efficiency and competition, but they also introduce new risks. Every financial institution is really a tech company that's playing in the financial services business. Our focus is on governance, risk management, and whether institutions understand how these tools affect decision-making and financial outcomes.
• Artificial intelligence is a good example of that balance. It creates real opportunities, but also introduces opacity, speed, and scale that can be difficult to oversee. We expect boards and senior management to apply clear accountability, testing, and controls to AI, just as they would for any other material model or technology.
• We are also evolving how we supervise these risks. Through initiatives like the Financial Industry Forum on Artificial Intelligence, led by the Global Risk Institute, we are working with industry to better understand adoption, assess emerging risks, and support responsible innovation that strengthens confidence in the financial system.

Governance

Moderator:

In a credit union, as in any financial institution, the Board of Directors serves as the ultimate steward of governance, overseeing risk and setting strategic direction. The Board is also expected to ensure the institution's resilience and its ability to deliver benefits to members.

How is OSFI ensuring that the financial institutions it regulates have effective Boards with the right experience and competencies to steward institutions through this increasingly complex environment? And in your view, is there a different approach to take to supervising governance at smaller federally regulated FIs and FCUs, versus the D-SIBs?

Superintendent Peter Routledge:

• We increasingly see governance as central to how institutions manage risk in a more complex environment. As risks become more interconnected, the role of boards in providing effective oversight and challenge becomes even more important. It's up to boards to make sure they have the right experience and competencies.
• Our focus is on outcomes, not just structures. We are looking at how judgment is exercised in practice, how risks are identified and escalated, and whether boards are challenging management effectively.
• We are also strengthening expectations around accountability and competencies. As part of our January 2026 Quarterly Release, we launched a consultation on a proposed senior leader accountability. The consultative document is available on our website, and we invite stakeholders to provide feedback by October 31, 2026.
• Proportionality matters, but it does not mean lower expectations. The core governance expectations remain the same, but how they are met should reflect an institution's size, complexity, and risk profile. Strong governance ultimately underpins resilience and trust. We are trying to find the right balance.

Canada's Credit Union Sector

Moderator:

Although they are part of Canada's larger financial sector, credit unions are different from other financial institutions. They are owned and governed on a cooperative basis. They are rooted in their communities. Some are regulated provincially while others are regulated federally. And all are guided by the seven cooperative principles. However, they operate within a regulatory environment that, in many respects, is designed for larger banks with different risk profiles and exposures.

Looking ahead, as the federal regulator, what would you expect to see from Canada's credit union sector?

Superintendent Peter Routledge:

• Credit unions play an important and distinct role in Canada's financial system. Their cooperative structure, community focus, and governance model are real strengths that contribute to diversity, competition, and resilience in the system.

• The discussion is broader than any one pathway. Whether through federal continuance, interprovincial expansion, or other models, the key question is how credit unions see their role evolving within the broader financial system. There is a serious demand for a mutual model for banking.
• As institutions grow, expectations rise, and we have been clear about what readiness looks like. That means strong governance, sound risk management, financial resilience, and the operational capacity to succeed under a federal prudential framework. There are three expectations that matter when an institution is considering federal oversight.
• First, an institution should be prepared for federal oversight, meaning having the track record, scale, systems, governance, and management expertise to operate effectively at the federal level, and to function under a risk‑based supervisory framework, including the potential application of any entry conditions, restrictions or other safeguards, as appropriate.
• Second, being financially resilient and sustainable. Institutions are expected to demonstrate stable earnings, strong capital and liquidity positions, and the ability to retain capital and absorb stress in line with an institution's size, complexity, and risk profile.
• And finally, institutions are expected to have a clear and viable pathway to federal continuance and stakeholder alignment. This means having a timely legislative path to provincial discontinuance and constructive engagement with members and the provincial regulator, with alignment on timing, expectations, and the implications of federal continuance.
• Looking ahead, the sector has real opportunities to grow and innovate. Our role is to provide clarity, consistency, and a prudential framework that supports whichever path institutions choose, while protecting resilience, fostering competition, and maintaining public confidence.

Credit union capital requirements

Moderator:

The C.D. Howe Institute recently published a paper with several recommendations, including changes to credit union capital requirements to help expand lending to small and medium-sized enterprises.

Could you share OSFI's perspective on this recommendation, and whether adjustments in this area are something OSFI is currently considering?

Superintendent Peter Routledge:

• We are looking at it and receiving the suggestions with an open mind. At OSFI, we calibrate capital requirements sector by sector based on the underlying risk, and we routinely assess whether those risk weightings need to be adjusted in response to changes in the risk landscape and stakeholder feedback.
• In doing so, we balance two objectives: enabling institutions to compete effectively while maintaining the financial resilience of Canada's financial system. I would also note that Canadian banks already have meaningful capacity to extend additional lending while remaining well above minimum capital thresholds.
  • For example, in November 2025 we launched a consultation on revisions to the Capital Adequacy Requirements, or CAR, guideline, including more risk‑sensitive treatment for certain commercial exposures and lower standardized risk weights for some SME and corporate lending. These proposals, many informed by smaller institutions, reflect our focus on better aligning capital with risk. We expect to finalize the guideline in September.
• We also recognize that credit unions play an important role in SME lending and in fostering competition. Through initiatives like our new streamlined approvals framework, launching next month, we are providing a quicker, clearer, more predictable path for new entrants, including credit unions seeking to continue federally.
• Taken together, this reflects our broader approach: evolving both our capital and entry frameworks to support lending and competition, while remaining firmly anchored to our prudential mandate.