Peter Routledge participates in a fireside chat at the National Insurance Conference of Canada 2025

Check against delivery

Moderator:

Canada’s financial system resilience remains at historically strong levels, but our annual productivity growth is well below the OECD average. Twenty years ago, we were 4th in the world in ease of doing business. By 2020, we were 23rd. We rank 28th – or below average – among OECD countries on product market regulation. Is there a relation between financial resilience and reduced productivity? If so, have we gone too far and need to adjust?

Superintendent Peter Routledge:

• First off, I would like to say that over the last 15 years, OSFI has built enduring resilience into Canada’s financial system. That resilience is a strategic advantage that can be tapped to support growth in the Canadian economy. A strong, stable financial system isn’t just a safeguard—it’s a catalyst for national prosperity.
• Canada’s prudential resilience and competitiveness aren’t in conflict—resilience is a platform for growth. As I’ve said in our statement last month, resilience in the financial system is essential to a strong economy.
• OSFI has proactively established an annual discipline of refining our regulatory guidelines and advisories to find opportunities to remove unnecessary burden. Our focus has been clear: reduce regulatory burden where possible, sharpen our focus on the most important risks, and ensure institutions remain resilient in an uncertain world.
  • Recent steps reflect that balance: reducing capital requirements for qualifying domestic infrastructure—targeted changes that free up capacity without weakening safeguards.
  • We’ve also paused the Basel III output floor increase to ensure a level playing field and predictability for Canadian banks, consistent with our efficiency agenda and aligned with the Government of Canada’s Red Tape Review.

Moderator:

The Prime Minister committed and introduced legislation to build one strong Canadian economy and address longstanding barriers that have fragmented our economy and reduced opportunities. We are seeing other countries re-orient their regulatory approaches to support economic growth. In the UK, for example, the government is moving to cut administrative costs tied to regulation by 25 per cent in an effort to increase productivity and support innovation. In the EU, the Commission has committed to reduce reporting obligations by 25%, and at least 35% for SMEs. Are you considering similar initiatives to re-orient OSFI’s approach to focus on supporting growth?

Superintendent Peter Routledge:

• Prudential safeguards remain our core job, but resilience and growth aren’t opposites. We’re pursuing regulatory efficiency—simpler guidance, eliminating low-value asks, and a predictable schedule—so banks and insurers can invest and innovate while we keep the system resilient. As I said in my letter to industry last month, this is not about doing less — it’s about doing things smarter.
• We’ve streamlined the rulebook and the cadence: rescinded 20 outdated guidelines and advisories; locked in Quarterly Release dates with follow-up Industry Days to improve predictability; and we’re reducing the scope/timing of some information requests and cancelling select pandemic-era data collections to free up capacity where it doesn’t add prudential value.
• We’ve made targeted capital adjustments that maintain safeguards and support productive investment: we deferred the next LICAT revision to post-2028 and lowered capital charges for qualifying domestic infrastructure debt and equity—measured changes that can unlock balance-sheet capacity without compromising resilience.

Moderator:

One of the major areas of focus for OSFI in recent years, and a significant undertaking from insurers to deliver on, has been the climate file and disclosures. We have Guideline B-15 where insurers are preparing to publicly disclose emissions and develop frameworks for how they manage climate risk, but there have also been the climate data returns, and the Standardized Climate Scenario Exercise — all of which have required significant time and effort from insurers. Can you talk about what the end goal is with all of these climate-related initiatives, and has your thinking evolved at all in terms of how OSFI views climate risk compared to other risks?

Superintendent Peter Routledge:

• Climate-related risks are financial risks that require greater measurement precision so that boards and senior managers can reflect these risks in institutions’ business strategies and risk management frameworks.
• Guideline B-15, the Standardized Climate Scenario Exercise (SCSE), and the Climate Risk Returns all lay the groundwork for insurers to build their risk quantification capabilities.
• But we know there is more work to do on the capacity building front. Consider, for example, less than half of the P&C insurers reported having experience with physical climate scenario analysis prior to the SCSE. This number is even lower for deposit-taking institutions and life insurers.
• Our work also revealed that, outside of the P&C sector, very few financial institutions precisely geocode their exposures. This represents a significant gap in an era of increasingly frequent and severe climate-related physical risks. Geospatial analysis is foundational for assessing the exposure and vulnerability of assets and is essential to ensuring that these risks are accurately measured and appropriately priced.
• Our thinking has evolved over the past few years. For example, we are now looking at catastrophic risks as including climate-related risks and earthquake risks. We see a lot of synergies and ways we can apply lessons learned in trying to improve the quantification of climate-related physical risks to what we’re learning on earthquake risks.

Moderator:

You have spoken about being most concerned about silent risks. Canada’s Minister of AI and Digital Innovation said “AI is a powerful driver of growth, productivity and innovation. It’s key to making sure Canada not only competes – but leads – on the global stage”. Given the government’s growth mandate, how is OSFI approaching AI?

Superintendent Peter Routledge:

• AI clearly brings opportunities for efficiency and innovation, but our lens is prudential. We focus on integrity and security risks — cyber, data governance, third-party dependencies, and ensuring boards can understand and govern how AI models work, also known as “model explainability”. If boards can’t explain or oversee the tools being used, resilience is at risk.
• We’re building capacity inside OSFI to understand:
  • How AI affects risks across the financial system. AI is amplifying and transforming existing risks, including market and cyber risks.
  • How AI is influencing decision-making and operational resilience.
• Our approach is principles-based: institutions are expected to identify and manage AI risks as part of their enterprise-wide risk management, with board accountability. That way, innovation can proceed while prudential safeguards remain in place.
• Staying on top of developments and challenges in this space is key. To that end we are actively engaging with industry stakeholders. For example, this year we are co-leading the second installment of the Financial Industry Forum on AI with DoF, FCAC, FINTRAC, GRI and OSFI. On July 2nd we published a joint report that summarized insights from our AI security and cyber security workshop. This fall, we will plan three additional workshops exploring the impact of AI on financial crime, financial stability and consumer wellbeing.

Moderator:

Follow-up: Can you pull out your proverbial crystal ball and speak to future-facing risks that you think will have us all up at night in the next few years?

• We will be issuing our Semi-Annual Risk Outlook next month. OSFI’s 2025 Annual Risk Outlook identifies integrity and security threats as a key supervisory priority. There is a dramatical shift in our geopolitical environment which is causing uncertainty. Fast-moving technologies, and third-party reliance makes financial institutions vulnerable to cyber-attacks, state-linked interference, and integrity-related risks. These threats are no longer hypothetical and they aim to disrupt trust and financial stability. Indeed, these integrity & security risks can expose banks and insurers to financial losses and reputational damage.
• We’ve seen ransomware, data breaches, and state-linked activity intensify. AI is accelerating the pace and scale of these threats. In response, OSFI has established a dedicated Integrity and National Security team which is helping us incorporate various integrity & security risks into the supervisory framework.
• We now engage institutions more directly on these risks—through thematic reviews, targeted examinations, and our collaboration with Canada’s security and intelligence agencies. This helps institutions shore up governance, third-party oversight, and cyber resilience.
• In volatile times, we can’t supervise alone. That’s why we hosted a classified national security forum in 2024 with CSIS (Canadian Security Intelligence Service) and CSE (Communications Security Establishment) to brief institutions on emerging threats. These sessions will continue.
• The financial system is a strategic target. Our job is to ensure institutions are prepared and resilient in the face of heightened geopolitical risk and evolving integrity & security risks, whether related to tariffs, trade protectionism, or broader uncertainty in the global market.