Latest news with #OSFI
Yahoo
4 days ago
- Business
- Yahoo
IMF warns of rising risks in Canada's financial system despite bank resilience
Canada's financial system remains broadly resilient despite mounting economic uncertainty, the International Monetary Fund (IMF) said in its latest assessment — but warned that rising household debt, mortgage renewals and gaps in cyber and pension oversight could expose vulnerabilities in the years ahead. In its 2025 Financial System Stability Assessment (FSSA), the IMF said Canada's big banks, insurers and pension funds are well-capitalized and capable of withstanding major economic shocks. However, the report flagged growing risks tied to a wave of upcoming mortgage renewals, high household debt levels and a lack of coordination among financial regulators — including the Office of the Superintendent of Financial Institutions (OSFI), the Bank of Canada and provincial authorities — in responding to systemic threats such as cyberattacks, housing market shocks and climate-related disruptions. For the banking and financial sector, the report said 'total assets of financial institutions reached 756 per cent of GDP in 2024, increasing by 43.3 per cent since 2019.' Non-bank financial institutions (NBFIs) have become a dominant force in the sector, now accounting for 65 per cent of total assets. Since the last IMF review in 2019, the NBFI sector has expanded significantly, with investment fund assets growing from $2.6 trillion in 2020 to $3 trillion in 2023 — roughly 110 per cent of GDP. Canada's insurance market ranked ninth globally in terms of written premiums, according to the report. Pension funds continue to play an outsized role, holding $2.2 trillion in assets in 2023, or about 75 per cent of GDP — one of the largest pension sectors in the G7. The IMF notes that while NBFIs remained resilient, data gaps and inconsistent oversight remain concerns, particularly for large pension plans. The sector has grown in size and importance since the 2019 assessment but regulatory coordination has not kept pace. The report said the banking sector's Common Equity Tier 1 (CET1) ratio is 13 per cent. The CET1 ratio measures a bank's core capital relative to its risk-weighted assets, indicating its ability to absorb losses. A higher ratio signals strong financial health and compliance with global regulatory standards. A 13 per cent CET1 ratio indicates that Canadian banks are well-capitalized — significantly above the international regulatory minimum of 4.5 per cent, and even above the commonly recommended levels of around 10–11 per cent. This gives them a strong buffer to absorb losses in times of economic stress. The report raised concerns about the real estate market in Canada. 'As of December 2024, approximately 60 per cent of mortgages will renew by 2026 at likely higher rates, which could increase payment burdens and delinquencies if economic conditions deteriorate,' it said. Canada has the highest household debt-to-GDP ratio among G7 countries, a key vulnerability flagged by the IMF. While it reflects strong credit access and homeownership, it also leaves households — and the broader economy — more exposed to rising interest rates, job losses or housing market downturns. On the positive side, the report noted Canada's mortgage delinquency rate stood at just 0.2 per cent in December 2024 — well below historical norms — suggesting most homeowners still managed to keep up with their payments despite rising rates in the last cycle. Under the IMF's 2025 adverse scenario, mortgage default rates are projected to rise to 0.9 per cent for uninsured loans and 1.4 per cent for insured loans, while corporate defaults could climb from 0.5 per cent to 1.3 per cent by 2027 — posing sharper risks than anticipated in 2019. The report also warned that broader geoeconomic tensions — global conflict, shifting trade policies, reduced labour mobility and weak financial systems — posed a high risk to Canada's economic outlook. Other emerging threats include cyber-attacks, climate change and a potential housing market correction. The IMF flags cyber risks as high, noting they could disrupt payment systems and undermine financial institutions' ability to function. Cuts to Canada's growth 'stand out' in latest IMF economic outlook Canada set to be fastest growing economy in G7 in 2025, IMF forecasts Climate-related disasters, such as wildfires and floods, carry medium-level risk, potentially triggering credit and liquidity stress. A sharp decline in home prices could drive up loan-to-value ratios, raise unemployment and curb household spending and investor confidence. Inicia sesión para acceder a tu portafolio
CTV News
26-06-2025
- Business
- CTV News
OSFI keeps domestic stability buffer on hold at 3.5 per cent
The Bay Street Financial District is shown with the Canadian flag in Toronto on Friday, Aug. 5, 2022. THE CANADIAN PRESS/Nathan Denette OTTAWA — The federal banking regulator says the amount of money Canada's big banks must keep on hand in case of economic shock will stay at its current level. The Office of the Superintendent of Financial Institutions held its domestic stability buffer at 3.5 per cent. The buffer applies to Canada's six largest, or systemically important, banks. Superintendent Peter Routledge says while risks and vulnerabilities remain, Canada's systemically important banks have entered this period of uncertainty from a position of strength thanks to the strong capital buffers. He says the regulator is prepared to act swiftly to lower the buffer, if necessary, to ensure financial institutions remain a source of strength for the economy. The buffer is reviewed and set every June and December, but can be changed at other times if needed. This report by The Canadian Press was first published June 26, 2025.
Reuters
26-06-2025
- Business
- Reuters
Canada banking regulator maintains key capital limit for big lenders
OTTAWA, June 26 (Reuters) - Canada's financial regulator said on Thursday it was maintaining the amount of capital the country's biggest lenders must hold, saying the uncertainties related to U.S.-Canada trade tensions were not stressing the financial system. The Office of the Superintendent of Financial Institutions (OSFI), which oversees the banks to ensure financial stability, maintained the domestic stability buffer (DSB) at 3.5%. "The uncertainty caused by rising trade disputes has not manifested itself in indicators of financial system stress," Superintendent Peter Routledge said in a press briefing. "We continue to assess potential impacts that a global trade conflict could have on the Canadian economy, with a special focus on spillovers to the financial system." Trade tensions between the U.S. and Canada, and U.S. President Donald Trump's tariffs have hurt trade, investments and jobs on both sides of the border. With ongoing tensions in the Middle East, Routledge said banks have "plenty of resilience" to absorb a more significant shock in financial markets caused by geopolitical tensions. The DSB is additional capital that Canada's big six banks must set aside to cover losses during financial uncertainties to ensure stability in Canada's economy. The buffer level is determined by various factors that include consumer debt levels, major fluctuations in the housing market and asset values. The DSB has a range from 0% to 4%.
Yahoo
26-06-2025
- Business
- Yahoo
Canada banking regulator maintains key capital limit for big lenders
OTTAWA (Reuters) -Canada's financial regulator said on Thursday it was maintaining the amount of capital the country's biggest lenders must hold, saying the uncertainties related to U.S.-Canada trade tensions were not stressing the financial system. The Office of the Superintendent of Financial Institutions (OSFI), which oversees the banks to ensure financial stability, maintained the domestic stability buffer (DSB) at 3.5%. "The uncertainty caused by rising trade disputes has not manifested itself in indicators of financial system stress," Superintendent Peter Routledge said in a press briefing. "We continue to assess potential impacts that a global trade conflict could have on the Canadian economy, with a special focus on spillovers to the financial system." Trade tensions between the U.S. and Canada, and U.S. President Donald Trump's tariffs have hurt trade, investments and jobs on both sides of the border. With ongoing tensions in the Middle East, Routledge said banks have "plenty of resilience" to absorb a more significant shock in financial markets caused by geopolitical tensions. The DSB is additional capital that Canada's big six banks must set aside to cover losses during financial uncertainties to ensure stability in Canada's economy. The buffer level is determined by various factors that include consumer debt levels, major fluctuations in the housing market and asset values. The DSB has a range from 0% to 4%.
Yahoo
26-06-2025
- Business
- Yahoo
OSFI maintains big banks' stability buffer at 3.5%
The Office of the Superintendent of Financial Institutions (OSFI) has maintained the domestic stability buffer for Canada's six largest banks at 3.5 per cent. The buffer was created as a 'rainy day' cushion to absorb unanticipated financial shocks. 'Conditions are .. better than our planning assumptions earlier in the year,' Peter Routledge, superintendent of OSFI, said Thursday. He said concern a trade war with the United States would lead to economic upheaval 'has not manifested itself in financial system stress.' The big banks entered the period of potential disruption in a 'position of strength,' Routledge said, with capital fortified in recent years and a total CET1 capital level of 13.6, on average. Moreover, other concerns that could lead to financial system vulnerabilities, such as household debt, have come down, while still remaining at a historically high level. He noted, however, that many Canadians will renew their mortgages at higher interest rates over the next 18 months than when the home loans were taken in 2020 and 2021, which will put 'financial pressure' on some households. 'We remain ready to respond should conditions change,' he said, adding that OSFI can act 'with urgency when necessary.' OSFI lowers the domestic stability buffer in times of stress, such as during the COVID-19 pandemic, to give the banks more room to continue extending loans and maintain liquidity in markets. It can also be raised in good time, with a cap of four per cent. OSFI kept the buffer stable at 3.5 per cent in December, saying the country's systemically important banks had sufficient capacity to absorb losses from unanticipated shocks and maintain critical services such as lending. But that was before U.S. president Donald Trump kicked off a global trade war that first targeted Canada and Mexico. In February, as economists were warning about the potential damage from tariffs and counter-tariffs, OSFI indefinitely paused the implementation of new global regulatory rules for banks and Routledge said he was considering responses to the trade war that would be along the lines of relief offered during the pandemic in 2020. Financial innovation will require regulators to embrace risk, OSFI head says Bank runs are still a risk to the financial system, global agency warns A key adjustment OSFI made at that time was to allow banks to treat mortgages and business loans as performing even when payments were deferred, thereby leaving the amount of capital that had to be held against them unaffected. The regulator also temporarily relaxed covered bond limits to give banks greater access to Bank of Canada facilities, and introduced transitional arrangements for the capital treatment of expected loss provisions under the Basel III framework. • Email: bshecter@ Sign in to access your portfolio
