Peter Routledge, Superintendent, gives OSFI Domestic Stability Buffer Announcement – December 2025

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Welcome to our December 2025 rate-setting announcement for the Domestic Stability Buffer, or DSB.

I am speaking to you from Ottawa on land that has long served as a meeting place amongst Indigenous peoples, including the Anishinaabeg Algonquin Nation, the traditional keepers of this land. I am grateful to be present in this territory.

The DSB is a capital buffer that enables Canada’s six domestic, systemically important banks, or D-SIBs, to absorb losses and continue lending to households and businesses during periods of stress.
Today, we maintain the DSB at 3.5% of total risk-weighted assets.

Several conditions factored into our decision:

• though stable, systemic vulnerabilities remain elevated;
• the DSB at its current level of 3.5% is proportionate to systemic vulnerabilities in OSFI’s view;
• near-term risks remain manageable as Canada’s banks continue to generate solid earnings despite a challenging operating environment; and
• with strong capital positions, Canada’s D-SIBs are not capital constrained, and have ample capacity to support households and businesses as economic and financial conditions evolve.

Moreover, since systemic vulnerabilities are stable, and in some cases below past highs, OSFI does not expect to increase the DSB from its current level absent a significant change in vulnerabilities.
OSFI also judges that the DSB range of 0% to 4% is consistent with low probability, high severity stress scenarios, enabling OSFI to respond when and if vulnerabilities intensify or moderate.

OSFI has deliberately built up the DSB over time to ensure Canada’s largest banks have the resilience to support the financial system during periods of uncertainty.

Canada’s largest banks hold strong capital levels, with Common Equity Tier 1 (CET1) ratios well above our supervisory expectation of 11.5%, averaging 13.6% across the sector.

The DSB is a balanced, made-in-Canada capital buffer. Unlike counter-cyclical capital buffers globally, a breach of the DSB would not result in automatic capital restrictions such as dividend cuts or a cessation of common share repurchases.

In the event of a breach, OSFI would expect a bank to provide a remediation plan for returning capital back above the DSB-implied floor. Automatic capital restrictions would only occur if a bank breached the minimum for an adequately capitalized systemically important bank of 8% on its Common Equity Tier 1 ratio (CET1).

Banks have a sizable capital cushion above the DSB and the DSB range; the cushion over the current DSB CET1 floor is over $60 billion; the cushion over the DSB range is more than $45 billion.

Ultimately, institutions determine how to allocate the capacity provided by their capital cushions by choosing amongst many options; which could include sustaining the prudentially sound shift towards the provision of credit for Canadian businesses, including small- and medium-sized enterprises, as they adapt to current conditions.

We continue to closely monitor existing vulnerabilities and risks, including still elevated and increasing household indebtedness, uncertainty in housing and commercial real estate, and some signs of strain in credit such as gradually rising delinquencies and provisions in certain consumer and business segments.

A decision to release the DSB will be a data-informed call based on how risks are evolving in real time. A release does not in and of itself signal a risk event; rather, it reflects OSFI’s independent judgment that systemic vulnerabilities have either materialized or have meaningfully dissipated.

As such, a DSB release should not be viewed as new information or a market-moving forecast, but as a routine adjustment to evolving economic conditions.

We continue to monitor the environment closely and will make further adjustments to the DSB as conditions warrant.

Thank you.