Superintendent Routledge participates in a fireside chat at TD Annual Conference

Check against delivery

Moderator:

What issues are currently top of the mind?

Superintendent Peter Routledge:

• We're entering 2026 with a financial system that is strong and well-capitalized, but the environment around it is uncertain. Geopolitical tensions, evolving financial technologies, and shifting global interest rate paths all matter for Canadian institutions.
• Over the next several months, OSFI will sharpen its focus on the risks that matter most: credit risk, liquidity risk, and institution accountability, or governance risk. Concentrating resources on these areas ensures institutions can adapt and grow while preserving confidence and resilience.
• On credit risk, OSFI is consolidating existing credit risk management guidance for mortgage lending, commercial real estate, and corporate lending into a single, principles-based guideline. A six-month consultation was launched yesterday and seeks feedback on its overarching principles and key content areas.
• On liquidity, yesterday we issued our final Liquidity Adequacy Requirements Guideline for 2026, aimed at improving consistency in liquidity risk measurement and supporting institutions' long-term strategic planning.
• And strong governance, especially clear accountability at the senior leadership and board level, is one of the best early warning systems a financial institution can have. Yesterday, we launched a nine-month consultation on senior leader accountability, a priority expectation that is key to resilience, risk management and public trust.

Moderator:

Do bank valuations matter? What role should shareholders and boards have to ensure success?

Superintendent Peter Routledge:

• Valuations matter, but they're not what guides OSFI's regulatory and supervisory mandate. Our first responsibility is to protect depositors and creditors. When institutions are well-governed, well-capitalized, and well-managed, valuations tend to reflect that strength. So, while we watch valuations as a signal, they are not what drives supervisory decisions.
• Shareholders and boards want the same thing OSFI wants: a resilient institution that can operate safely and soundly through uncertainty. Engaged shareholders strengthen boards, and strong boards strengthen management.
• OSFI's Supervisory Framework can be leveraged by boards in executing their stewardship role. Instead of a once-a-year score, boards now receive clearer, more specific assessments of strengths and vulnerabilities across key risk categories. That clarity empowers boards to act early, challenge management effectively, and contribute to long-term value. This ultimately benefits both shareholders and the broader financial system.

Moderator:

How do all these geopolitical issues affect your job as Superintendent?

Superintendent Peter Routledge:

• Geopolitical uncertainty affects OSFI's work indirectly, not directly. We don't respond to headlines, but we do respond to the way global tensions can shift economic conditions, trade flows, funding markets, and business confidence. Those shifts influence the environment in which Canadian institutions operate, and that's where it matters for us.
• Periods of geopolitical tension often require banks to adjust their operating models quickly. Our job is to make sure the financial system remains resilient enough so they can support households, businesses, and especially small and medium-sized enterprises, even as conditions change.
• We supervise so that institutions can continue to take reasonable risks. In uncertain times, we focus on the fundamentals: capital, liquidity, and strong governance. We aim to ensure that risk-weighted assets reflect underlying risk, not unnecessary friction. A resilient system is one that can absorb shocks, and help the economy work through uncertainty rather than amplify it.

Moderator:

How can risk weightings help banks foster Canada's economic prosperity?

Superintendent Peter Routledge:

• Risk weights work when they reflect the underlying risk of the exposure. If the risk is priced correctly, banks have the confidence and flexibility to lend into productive parts of the economy without compromising their safety and soundness. Getting that calibration right is essential for long-term prosperity.
• We're beginning to test that calibration in a careful, measured way. In the draft CAR revisions released last fall, we proposed lowering the risk weight on some business loans from 100 percent to 75 percent where the evidence supports it. That kind of targeted recalibration does not put the system at risk but can release capacity for banks to extend credit. Similar opportunities may exist in internal-ratings-based approaches where the data justifies it.
• A resilient financial system is an enabler of economic adaptation, not an obstacle to it. Canada will face shifts in trade, technology, demographics, and competitiveness over the next few decades. A well-calibrated capital framework helps ensure the system's long-term resilience.

Moderator:

How does CUSMA play into trade risk assessment when determining the DSB?

Superintendent Peter Routledge:

• Trade agreements like CUSMA are part of the broader macro context OSFI monitors, but they are not direct inputs into DSB decisions. OSFI looks at trade developments as they affect the economy and the financial system, not as standalone policy variables.
• Uncertainty around trade is a risk context, not a trigger for changing the DSB. The DSB responds to evidence of system-wide vulnerabilities or stress, not to uncertainty or speculation about negotiations or outcomes.
• When trade-related developments matter for the DSB, it's because they materially affect credit quality, funding conditions, or broader economic performance. For example, a sustained deterioration in economic conditions that leads to higher losses or tighter financial conditions could be relevant, but the trade channel itself is indirect.
• At the current level, the DSB reflects OSFI's assessment that vulnerabilities have stabilized and that the buffer (including the DSB range of 0-4%) is proportionate to the risks in the system. That assessment already takes into account a range of external uncertainties, including trade.
• The DSB is designed as an insurance mechanism. It's there so that if uncertainty turns into actual economic or financial stress, capital can be released to support lending and stability rather than reacting pre-emptively to uncertain scenarios.

Moderator:

Some are calling for greater competition between banks. What is OSFI's role in federal continuance?

Superintendent Peter Routledge:

• OSFI's role in federal continuance is prudential. We don't decide who should or shouldn't enter the federal system. Our mandate is to assess whether institutions that want to federalize can meet the safety, soundness, and governance expectations required to operate as federally regulated financial institutions. The Department of Finance makes the final policy decisions.
• That said, we can play an important role in making the process clearer, faster, and more predictable, especially for smaller institutions and credit unions. We are working to shorten approval timelines, provide more transparency on expectations, and make the path to a federal license easier to navigate for institutions that want to compete nationally.
• OSFI intends to launch a pilot for the fast-track framework in June 2026 to test our approach. Lessons from the pilot will shape a broader rollout.
• The initial scope will focus on credit unions and entities with technologically innovative or emerging banking models, such as fintechs and crypto custodians. OSFI will be prioritizing structured, risk-based reviews, with earlier identification of issues, and clear service standards.
• Overall approval times are expected to be shorter. However, overall processing times depend on several factors including the completeness and quality of the applicant's submission and the completion of security reviews.
• More information will be shared at our Industry Day February 12.

Moderator:

To what extent does OSFI benchmark its stance on DSB (and other tools for capital requirements) against what other countries' regulators do? If countries like the U.S. ease capital requirements, can we expect OSFI to follow to preserve Canada's competitiveness?

Superintendent Peter Routledge:

• OSFI closely monitors international regulatory developments, but capital decisions are grounded in Canadian risks and conditions. International comparisons provide context, but they are not a template. Canada's financial system, economic structure, and risk profile are distinct.
• The DSB and other capital tools are calibrated based on evidence of vulnerabilities and stress in Canada, not in response to policy shifts in other jurisdictions. If capital requirements change, it's because Canadian risks warrant it, and not because another country has moved in a particular direction.
• In the coming weeks, we intend on releasing a technical note on benchmarking Canadian bank capital ratios to international peers.
• To date our analysis shows:
  • Canadian systemically important banks are well capitalized and are among the most profitable globally.
  • Canada's bank capital requirements are comparable to those of major international peers.
  • OSFI's oversight focuses on material risks while minimizing unnecessary burden, supporting financial stability and enabling banks to lend and invest.

Moderator:

Earlier this year, OSFI reduced the charges related to credit risk (from 6% down to 3%) and market risk (from 40% down to 30%) for insurers under LICAT. What is the outlook for similar capital reductions around commercial loans for banks? Should we expect such reductions to be targeted to specific, economically critical sectors?

Superintendent Peter Routledge:

• OSFI calibrates capital requirements sector by sector, based on the underlying risk. The LICAT changes for insurers and the draft revisions to the Capital Adequacy Requirements Guideline for banks both follow the same principle: where the evidence shows risk is lower than previously assumed, it is reasonable to revisit the calibration.
• On the bank side, we have launched a consultation on draft CAR revisions that include targeted changes to certain commercial-type exposures. For example, the draft proposes more granular, risk-sensitive treatment for land acquisition, development and construction lending, and lower standardized risk weights for some SME and investment-grade corporate exposures, as well as for exposures to Canadian systemically important banks. Those proposals are still out for comment and are not yet final.
• These proposals include targeted recalibrations based on underlying risk that support productive lending while maintaining strong safeguards. In so doing, the draft revisions aim to contribute to a resilient financial system. The consultation process is underway, but the direction is purposeful: more risk-sensitive capital treatment where the evidence supports it.

Moderator:

How does OSFI see current progress around the implementation of the Loan-to-income measure and variable rate fixed payment mortgages (VRMFPs)? Should we expect OSFI to shift more towards a portfolio-level approach to risk management, and away from loan-level risk metrics?

Superintendent Peter Routledge:

• OSFI continues to closely monitor mortgage credit risks, including VRMFPs, as part of its assessment of household vulnerabilities. Although delinquency rates are still low compared to historic levels, 90+ day delinquencies have sharply increased over the past two years.
• As of October 2025, the percentage of total mortgages (by count) renewing by the end of 2027 fell to 60% or 3.5 million mortgages. Of those, 1.6 million mortgages were fixed rate or variable rate mortgages with fixed payments that originated prior to March 2022. These loans are experiencing the largest payment increases.
• OSFI has determined that the loan-to-income (LTI) limits pilot has been successful and will remain going forward. LTI limits lessen the build up of highly levered mortgage loan originations, which in turn reduces systemic risk.
• OSFI's supervisory approach is guided by evidence and judgment rather than a shift away from specific tools. The objective is to ensure that household credit risks remain well managed and that vulnerabilities do not build in ways that could threaten financial stability.
• The LTI limits will remain in place with the minimum qualifying rate (MQR) serving as a complement at this time.