Capital buffer for biggest banks will remain at 3.5%
High levels of household debt have eased slightly, mortgage rates are lower, and the impact of trade tensions has not resulted in financial system stress – all in all there’s been a moderation of some vulnerabilities for Canada’s big banks.
That was a key message from the Superintendent of Financial Institutions, Peter Routledge, as he announced that the Domestic Stability Buffer (DSB) for the big six banks will remain at 3.5%. The usable capital buffer determined by OSFI is deemed critical for those banks that are systemically important to avoid significant financial shocks.
“While the 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 they have fortified in recent years,” said Routledge. “We are prepared to act swiftly to lower the DSB, if necessary, to ensure financial institutions remain a source of strength for the economy.
The regulator says that a reduction of the DSB, which is close to its 4% upper limit, will depend on financial conditions and “would signal the exceptional banking system resilience built up since the global financial crisis of 2008-09.”
However, for now, OSFI will “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.”
OSFI also noted the profitablity of big banks, as revealed in recent financial results.
