Theresa Hinz, Executive Director of Policy and Risk Response and Jacqueline Friedland, Executive Director Risk Assessment and Intervention Hub deliver remarks for Quarterly Release Day

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Theresa Hinz:

Thank you, Christina.

My name is Theresa Hinz and I am the Executive Director of Policy and Risk Response.

Joining me today is Jacqueline Friedland, the Executive Director of OSFI’s Risk Assessment and Intervention Hub. I’m speaking to you from Ottawa, on the traditional unceded territory of the Algonquin Anishinaabe people.

Thank you for joining us for our Quarterly Release Day.

Canada’s financial system is navigating profound uncertainty—from geopolitical instability and cyber threats to climate change and domestic economic shifts. Over the last 15 years, OSFI played a key role in building resilience in Canada’s financial system to support stability and enable sustainable growth. This resilience positions Canada’s banks to continue supporting the country’s adjustment to a rapidly changing environment.

In this Quarterly Release, OSFI advances smart oversight and regulatory efficiency, and reinforces stability through updated capital requirements, rescinding guidance documents, and enhanced supervisory practices. This unlocks capacity for institutions to compete effectively and contribute to economic growth.

This quarter, we will announce the:

• Consultation on draft Capital Adequacy Requirements (CAR) Guideline (2027): Enhancing the clarity of our capital rules, improving the consistency of their application, and ensuring that capital requirements continue to be aligned with the underlying risk faced by institutions.
• Final Minimum Capital Test (MCT) Guideline (2026): Reducing compliance burden by simplifying and clarifying requirements while ensuring insurers remain strong and able to protect policyholders.
• Supervisory Framework Post-Implementation Review Report: Incorporating feedback to refine practices and strengthen oversight.
• Insights from the 2025 Climate Risk Returns and updated returns: Improving data quality and comparability to help institutions manage climate risks proactively while reducing reporting burden.
• Additional rescission or removal of documents from the guidance library: Streamlining our guidance library ensures regulatory expectations are clearer.

These releases show OSFI’s commitment to clear, modern guidance that keeps Canada’s financial system safe, stable, and ready for the future.

I’ll now turn it over to Jacqueline for her technical presentations.

Jacqueline Friedland:

I’ll start with the Consultation on draft Capital Adequacy Requirements, or CAR, Guideline (2027).

We have launched a 90-day public consultation on proposed revisions to the Capital Adequacy Requirements Guideline for 2027. The draft includes several important changes such as:

• lowering the base risk weight for low-rise residential real estate from 150% to 130% to better reflect its lower risk profile
• introducing a 90% risk weight for residential acquisition, development, and construction (ADC) projects—both high and low-rise—where pre-sales are at least 75%
• introducing a preferential risk weight of 110% for commercial ADC loans with 50% pre-sales or pre-leases, up to a loan-to-value of 70%.
• allowing institutions to treat ADC projects with loan-to-value ratios below 80% as substantially complete and apply income-producing commercial real estate treatment when a certificate of occupancy has been issued

For corporate exposures:

• lowering the risk weight applied to Corporate Small and Medium Size Enterprise exposures
• lowering the risk weight under the credit risk Standardized Approach for unrated non-investment-grade corporate exposures.

For exposures to Canadian Systemically Important Banks (SIBs):

• reducing the risk weight for exposures to Canadian SIBs from 20% to 15%. This lower risk weight also applies to covered bonds issued by Canadian SIBs.

For market risk requirements, the proposed revisions:

• touch on credit spreads and maturity assignments for cash equity positions in market risk capital as well as update ongoing monitoring and approval requirements.

These revisions are designed to align capital requirements more closely with risks by increasing the granularity and risk sensitivity of the capital treatment, while freeing capacity for institutions to extend credit and support economic growth. The consultation period ends on February 18, 2026.

Next, we will talk about the Final Minimum Capital Test, or MCT, Guideline (2026).

The final MCT Guideline introduces updates to modernize the capital requirements framework for property and casualty insurers.

The updates:

• simplify the unexpired coverage formula for insurance risk to ensure consistent interpretation
• clarify that only receivables from a certain type of reinsurance arrangement called “funds withheld” can be included as net assets available for Canadian branches of foreign insurers
• remove the requirement for OSFI’s prior review on reinsurance arrangements that were subject to an approval for capital purposes in the branch adequacy of assets test and updates capital confirmation requirements for user fees to improve transparency and align fees with actual service costs

Minor adjustments and clarifications have also been made to ensure accurate application of the framework.

These changes help ensure insurers maintain adequate capital to meet obligations and cover potential losses, with the guideline taking effect on January 1, 2026.

The next item in today’s Quarterly Release is the Supervisory Framework Post-Implementation Review Report.

OSFI launched its new Supervisory Framework in April 2024—a major step to strengthen risk-based supervision and enhance transparency.

This year’s review marks the first post-implementation cycle ensuring the framework remains effective and well-aligned to the changing risk environment.

To complete the review, OSFI:

• gathered feedback from over 100 participants, including financial institutions, Financial Institutions Supervisory Committee partners, audit advisory committees, industry associations, and OSFI staff;
• and, analyzed data and trends from the first year of implementation.

Overall, the updated Framework improved supervisory effectiveness and communication.

Specifically, it:

• enables better risk conversations through clearer supervisory letters and the new Overall Risk Rating, also known as the “ORR”;
• and, it supports earlier intervention by enhancing OSFI’s ability to respond to emerging risks and take earlier actions.

The review identified two key areas for improvement:

The first area is the “Weakest link” risk rating approach.

While the weakest link will remain foundational to the determination of the ORR, the methodology will consider circumstances where the ORR can be better than the weakest link to ensure that it accurately reflects the risk to viability.

The second area is “Clarity and transparency in methodology”.

OSFI will refine rating definitions and indicators across levels 1 to 8, clarify risk tolerance and ORR alignment with Intervention Stage Ratings, and explicitly integrate integrity and security risks into risk governance and operational resilience assessments.

OSFI is developing an action plan to implement these refinements in phases through the end of 2026-27 fiscal year. More details will be shared at Industry Day on December 4, 2025.

Insights from the 2025 Climate Risk Returns.

The lessons learned report summarizes insights from the first set of Climate Risk Returns submissions and outlines future amendments. OSFI is also publishing updated returns with amendments effective in fall 2025.

Initial submissions marked a significant step forward in building Canada’s capacity for climate risk measurement and reporting, showing how institutions approach climate-related data collection, reporting, and risk management.

They also revealed key challenges such as data gaps, reliance on proxies, and inconsistent reporting practices, while capturing new physical risk data from banks and insurers that had not been included in previous regulatory returns.

These efforts are critical because climate-related risks can have financial impacts that affect the stability and resilience of Canada’s financial system.

I’ll now hand it back to Theresa to discuss additional rescission or removal of documents from the guidance library.

Theresa Hinz:

Thank you, Jacqueline.

Additional rescission or removal of documents from the guidance library.

As part of its Policy Modernization, we’re removing outdated or redundant guidance and related documents from our guidance library.

Over the past 18 months, we undertook the most comprehensive review of regulatory content in OSFI’s history.

Following guidance rescissions in April 2025, OSFI is rescinding or removing 32 additional documents from our guidance library by December 31, 2025.

In total OSFI has eliminated 52 documents representing more than 600 pages of content in English and French.

This work enhances regulatory efficiency by streamlining our guidance library so expectations are clearer, targeted, and aligned with OSFI’s mandate.

In closing, I’d like to highlight how today’s announcements fit into OSFI’s broader strategic direction.

Today’s releases align with OSFI’s ongoing initiative to modernize guidance and reduce regulatory complexity so institutions can focus on managing material risks effectively.

These releases also build on priorities identified in OSFI’s Annual and Semi-Annual Risk Outlooks, which outline the most significant risks facing Canada’s financial system.

The work we are doing, including these Quarterly Releases, reflects OSFI’s commitment to clarity, relevance, and responsiveness. And our actions are based on continuous industry engagement and a commitment to smart, effective oversight.

Thank you for joining us today.

I will now turn it over to Christina to moderate the Q&A portion.