Peter Routledge participates in a fireside chat at the Economic Club of Canada 2025

Check against delivery

Moderator:

Given the evolving macroeconomic and geopolitical landscape, how does OSFI currently assess the risk environment facing federally regulated financial institutions, and what are the most notable shifts or emerging risks since the publication of the 2025-2026 Annual Risk Outlook in March 2025?

Superintendent Peter Routledge:

• In March, OSFI identified four key risks:
  • Integrity and security risk
  • Wholesale credit risk
  • Funding and liquidity risk
  • Real estate secured lending (RESL) and mortgage risks
• These four remain our focus, but the Semi-Annual Risk Outlook (SARO) shows how the risk environment has shifted:
  • Ongoing uncertainty related to tariffs and trade protectionism.
  • Continued weakness in the Canadian housing market, particularly in condos in the Greater Toronto Area (GTA) and the Greater Vancouver Area (GVA).
  • We are also seeing a gradual rise in mortgage delinquencies from historically low levels, especially in variable rate fixed payment mortgages.
• These dynamics may strain borrowers and increase credit risk, but Canada's financial institutions remain resilient, with strong buffers and effective risk management practices. That resilience is a strategic advantage — it allows our financial system not only to withstand shocks, but also to support growth in an uncertain world.

Moderator:

Given OSFI's acknowledgment that trade disputes and rising protectionism may complicate Canada's economic landscape, how is OSFI preparing to mitigate the potential systemic risks that tariffs and other trade barriers could pose to federally regulated financial institutions?

Superintendent Peter Routledge:

• We have already started. To address these risks, OSFI is undertaking the following actions:
  • Strengthening institutional preparedness for stress events and being ready to take measures that allow institutions to leverage on the resilience they've built.
  • We are maintaining heightened monitoring of liquidity and funding profiles, with special attention to liquidity risk management at material foreign operations.
  • Industry consultations were also recently concluded on revisions to the Liquidity Adequacy Requirements Guideline, and a proposed Internal Liquidity Adequacy Assessment Process.
  • OSFI will continue to refine its supervisory tools and stress testing approaches, always with transparency and proportionality.
  • At the same time, our work on regulatory efficiency, which includes eliminating redundancies, tailoring intensity to risk, and pausing select initiatives, ensures federally regulated institutions can continue to take risks, compete effectively, and support growth even in an uncertain trade environment.

Moderator:

OSFI has identified real estate secured lending and mortgage risks as a top concern (particularly the payment shock expected from mortgage renewals and the growing prevalence of negatively amortizing variable-rate mortgages). How is OSFI working with financial institutions to ensure they are adequately capitalized and prepared to manage the potential rise in defaults and credit losses?

Superintendent Peter Routledge:

• While mortgage delinquencies are still near all-time lows, they are trending upward. We are seeing higher delinquencies in variable rate fixed payment mortgages, as well investor and self-employed borrower types.
• Elevated household debt and concentrated activity in certain markets—like the preconstruction condo market in the GTA and GVA — mean that stresses in these segments could spill over into the wider financial system.
• Since 2012, we have fundamentally transformed underwriting practices through Guideline B-20, Regulatory Notices, Supervisory Letters and various backgrounders posted to our website. Today, most borrowers demonstrate strong income coverage for payments and hold significant equity in their homes relative to loan amounts. Most recently, OSFI has reinforced its expectations on blanket appraisals and appraisal timing, ensuring property values are realistic and current.
• On the institutional side, Canada's banking system remains well capitalized. Canada's systemically important banks reported Common Equity Tier 1 (CET1) ratios that averaged 13.7% in the most recent quarter, 220 basis points above the floor. That resilience, built over the past 15 years, provides capacity to manage localized stress in the condo market and broader vulnerabilities. We remain confident that the system's resilience is sufficient to manage the risks we face today.

Moderator:

OSFI has taken significant steps to streamline its regulatory framework, including rescinding outdated guidelines, refining its policy release schedule, and pausing Basel III's output floor, to enhance transparency and reduce unnecessary burden. 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:

• Last year, OSFI established a discipline of continuously refining its regulatory guidelines and advisories, looking for opportunities to remove outdated or redundant expectations.
• OSFI is seeking regulatory efficiencies that enable financial institutions to take risks, compete effectively, and contribute to growth in the Canadian economy, while ensuring resilience is never compromised. This approach is agile, targeted, transparent, and risk-based, consistent with OSFI's long-term principles.
• We will announce further rescissions of guidelines and advisories on November 20, in keeping with our habit of continually and proactively streamlining the supervisory and regulatory environment.
• Our actions will remain deliberate, focused, and strategic. Resilience in the financial system is not just a safeguard — it is essential to a strong economy and creates the conditions for sustained growth and public confidence.
• We think there is an optimum level of regulation and supervision – one that lessens the likelihood that a financial shock damages the economy but avoids the "stability of the graveyard in which economic growth is unnecessarily slowed by an excessive aversion to financial system risk. And that optimum level changes with the times.

Moderator:

OSFI has emphasized its commitment to regulatory efficiency while maintaining resilience in the financial system. How does OSFI determine which guidelines or advisories can be safely rescinded without compromising its supervisory effectiveness, especially in a time of evolving financial risks?

Superintendent Peter Routledge:

• We have always been a proactive and forward-looking regulator. We are not chasing yesterday's risks—we are positioning Canada's financial system for tomorrow's opportunities.
• To do this, we follow a discipline of regulatory efficiency. That means assessing our full suite of guidance and asking: does this instrument address a material, current risk? Is it clear and proportionate? If the answer is no, we rescind it. If yes, we refine or update it. This discipline helps us eliminate duplication, reduce outdated requirements, and concentrate supervisory attention where it matters most.
• Our oversight includes both the development of policy and guidelines, and the supervision of financial institutions. We use a risk-based, principles-based, and outcomes-focused supervisory model. Institutions with higher risk profiles receive more intensive supervision, while those with lower risks are monitored with a lighter touch. We also recognize that institutions vary in size and complexity, and tailor our supervisory approach accordingly. This calibrated model ensures that rescissions never compromise resilience but instead make supervision more effective and proportionate.