Superintendent Peter Routledge participates in a fireside chat at the 2026 Scotiabank Financials Summit

Moderator:

The recent move to the DSB being lowered to 3.0% is the first change that you've made since June 2023 and the first cut since the pandemic. Can you talk about some of the key factors that might have shifted to justify easing now rather than holding, given current geopolitical risks, outcome of recent tariff negotiations with the US, and elevated household debt in Canada?

Superintendent Peter Routledge:

• The DSB is a capital buffer that enables Canada's six systemically important banks to continue lending to households and businesses during periods of economic uncertainty. In calibrating and adjusting the DSB, we consider both the resilience benefits of additional capital, and the broader impact on the financial system's ability to support economic adjustment and adaptation.
• In June, we took two actions with the DSB -- we lowered the level of the DSB to 3.0%, from 3.5% of total risk-weighted assets, and we lowered the range to 0% to 3%, from 0% to 4%. Taken together, these actions give Canada's largest banks greater flexibility to deploy capital in support of the economy.
• Lowering the Domestic Stability Buffer level and the range reflects confidence to support Canada's economic adaptation, investment and long-term growth, without compromising the safety and soundness of the financial system.
• Canadian banks remained well capitalized, profitable and resilient, with CET1 ratios averaging about 13.5%, well above OSFI's supervisory expectation. That strength gives us confidence they can continue supporting households and businesses while maintaining substantial loss-absorbing capacity.
• The Domestic Stability Buffer is a usable buffer, not a permanent maximum. We believed that it was an appropriate time to provide banks with greater flexibility to deploy capital in support of Canada's economic adaptation, investment and long-term growth.
• While geopolitical uncertainty, trade risks and household debt remain important considerations, our analysis shows that beyond a certain point the resilience benefits of additional capital diminish, while the impact on financial intermediation becomes more pronounced.

Moderator:

The 50 bps DSB reduction releases roughly $74 billion in deployable capital according to the OSFI press release, or ~$673 billion of risk-weighted asset capacity. How much do you care whether that capital is being channeled into lending vs. other forms of excess capital deployment such as share repurchases or M&A? Any context on how OSFI might play a role in helping the government's policy related to spurring lending growth to build Canada?

Superintendent Peter Routledge:

OSFI's role is to create the conditions for sound capital allocation by maintaining a resilient and predictable prudential framework. The DSB decision and our broader capital policy work are intended to provide institutions with the confidence and flexibility to support Canada's long-term economic growth while maintaining financial stability.

• The banks must make their own decisions on allocation of capital. Those decisions belong to management teams and boards. In the current environment, Canadians will be watching whether banks use the additional capital flexibility to invest in Canada to support growth.
• To aid the banks, as part of our ongoing modernization of the prudential framework, we're focused on ensuring capital requirements are appropriately calibrated to risk and do not create unnecessary constraints on institutions' ability to support economic activity while maintaining resilience and financial stability.
• By lowering both the level and the range of the DSB, we've removed capital as a potential constraint and provided greater certainty and flexibility for long-term capital planning.
• Canada is entering a period of significant investment opportunities. Strong capital and financial resilience are not obstacles to growth; they are the conditions that make growth possible.
• The same philosophy is reflected in our latest Quarterly Release. For example, through updates to the final CAR Guideline (2027), we are reducing capital requirements where warranted, including loans to small businesses.

Moderator:

On the DSB range coming down by 100 bps at the top end of the range, can you share some thoughts on that decision? Should investors think of the DSB range as a moving target given that the decision to increase it 150 bps to 4.0% was made only 3.5 years prior in late 2022 and now back down 100 bps? If it could possibly move again, can you discuss what factors would matter most?

Superintendent Peter Routledge:

As a usable buffer, the DSB is intended to increase or decrease as conditions change. Its range is calibrated to allow D-SIBs to absorb losses through severe but plausible stress events while maintaining lending, balancing the benefits of resilience with the need to support economic adjustment.

• Lowering both the DSB level and the top of the range was intended to provide greater clarity and certainty for institutions as they make long-term capital planning decisions.
• Canada's economic adaptation will unfold over several years. We wanted banks to have confidence in the capital framework as they support investment and long-term growth.
• From a base of sound financial resilience, we continue to assess whether our regulatory requirements remain aligned with the Canadian economy's current needs.

Moderator:

Some have characterized the change as an effort to align more closely with comparable moves in the U.S. and U.K., where the Fed has proposed lower CET1 requirements and the U.K. FPC set a reduced system-wide benchmark. To what extent did creating perhaps a more level playing field with foreign banks factor into your decision, versus purely domestic considerations?

Superintendent Peter Routledge:

• International developments are an important context, and we monitor them closely. Canada does not operate in isolation. We listen to our constituents.
• Having said this, our capital decisions are based on Canada's risk environment and our assessment of what is necessary to maintain resilience and confidence in Canada's financial system.
• Canada's financial system has long been recognized internationally as a national strength because it rests on prudent regulation, sound supervision, robust risk management and a sustained commitment to stability and resilience.
• We calibrate capital requirements according to the risks, vulnerabilities and opportunities we see in the Canadian financial system—not by matching decisions made elsewhere.
• Our benchmarking analysis (posted to our website shows) that Canadian banks remain comparable with international peers from both a resilience and competitiveness perspective.

Moderator:

Any thoughts on private credit and the risks associated with it for the banks that you supervise? Seems like there were some concerns by the market that quickly faded over time.

Superintendent Peter Routledge:

Our focus is on whether private credit is creating new vulnerabilities or changing how risks are transmitted through the financial system. The vulnerabilities OSFI monitors are real and interconnected, and our focus is on understanding how risks move across institutions and markets.

• We continue to monitor the connections between banks and non-bank financial institutions, including lending relationships, funding arrangements and other exposures. Those interconnections remain an important supervisory priority.
• We're not seeing evidence of broad systemic stress today, but private credit continues to be an area of close supervisory attention. We're strengthening our monitoring, analytical capabilities, and data to identify vulnerabilities early.

Moderator:

Can you talk about your commitment to more competition in the Canadian market with respect to banking? What would make you content from that perspective, or said differently, what is the ideal competitive landscape that you strive for over time (i.e. number of competitors in the market, foreign companies participating, how banking services may change)?

Superintendent Peter Routledge:

• Our role is to ensure the prudential framework does not create unnecessary barriers to responsible competition.
• We can support competition by keeping our expectations clear, proportionate, and appropriately calibrated while maintaining resilience and public confidence.
• As part of our regulatory modernization work, growth and competition are increasingly informing our prudential judgment as secondary considerations. They do not replace our core focus on resilience and financial stability, but they help ensure the framework remains effective, proportionate and supportive of a dynamic financial sector.
• A good example is our streamlined approvals framework for targeted new entrants, which reduces approval timelines while maintaining prudential standards.
• Our September Quarterly Release continues that same approach through the final CAR Guideline (2027), which aligns capital requirements more closely with actual risks while maintaining a resilient and internationally credible framework.

Moderator:

Aside from credit risk, what other risks are top-of-mind for you at the moment and do any of them keep you up at night?

Superintendent Peter Routledge:

• The vulnerabilities we monitor are real and increasingly interconnected, which is why resilience remains so important. Our focus is on understanding how risks interact and reinforce one another. Disruption, uncertainty and volatility are persistent features of the landscape
• The Annual Risk Outlook identifies the following top risks: Real-estate secure lending and mortgage risks, Non-Bank Financial Intermediation risks, and funding and liquidity risks.
• Technology is reshaping financial services. AI, cyber threats and third-party dependencies are creating new opportunities, but they are also increasing the speed and complexity of risk.
• The work we're announcing in our September Quarterly Release reflects how we're adapting the prudential framework to evolving risks, including the final Capital and Liquidity Treatment for Crypto-asset Exposures Guideline.

Moderator:

Switching the conversation now to the lifecos, can you share your broad views on the sector, which has different risks than banks?

Superintendent Peter Routledge:

• Canada's life insurance sector continues to operate from a position of strength. That strength supports the public confidence that is essential to a well-functioning financial system.
• Canadian insurers are well capitalized, internationally active and have demonstrated resilience through a wide range of economic and market conditions.
• While insurers face different risks than banks, including long-term liabilities, investment risk and reinsurance exposures, the fundamentals remain the same: strong governance, sound risk management and operational resilience.
• As the risk environment evolves, we're continuing to modernize the prudential framework to ensure it remains effective, proportionate, and responsive to the sector's changing risk profile. OSFI has charted a course of continuous modernization of its regulatory approach from a position of strength.
• Our September Quarterly Release includes several initiatives that reflect that approach, including the final Mortgage Insurer Capital Adequacy Test (MICAT), and updates to insurance regulatory returns to reflect IFRS 18.
• In November we will release the draft Guideline B-2 Property and Casualty Large Insurance Exposures and Investment Concentration.

Moderator:

With more life insurance liabilities being ceded to offshore reinsurers, is the current level of oversight on those arrangements sufficient? Or might there be some work to strengthen work on potential risks?

Superintendent Peter Routledge:

• Reinsurance is an important and well-established risk management tool. Our objective is to ensure the risks are well understood and appropriately managed.
• Canada's prudential framework already includes important safeguards. Capital recognition depends on the quality of the risk transfer and the availability of appropriate collateral, which provides meaningful protection for policyholders.
• More broadly, our focus is on ensuring institutions understand their exposures, maintain strong governance, and effectively manage risk as the operating environment continues to evolve.
• In a world of persistent uncertainty, the fundamentals of prudential supervision remain critical.