Canada's banking regulator lowers stability buffer for big banks, allowing them to lend more (updated)

Royal Bank of Canada

19/06/2026 14:25

(Adds details throughout, regulator's comments, graphics)
    * OSFI cut the domestic stability buffer to 3% from 3.5%,
effective immediately
    * The lower buffer applies to Canada's six biggest banks
    * OSFI said the change could unleash hundreds of billions of
Canadian dollars for lending

    By Nivedita Balu
    TORONTO, June 19 (Reuters) - Canada's banking regulator on
Friday lowered the capital requirement for the country's biggest
banks for the first time in three years, a move that will allow
them to lend more as the government seeks to boost investment in
AI, resources and other areas during trade and geopolitical
uncertainties.
    The Office of the Superintendent of Financial Institutions
(OSFI), which oversees the banks to ensure financial stability,
lowered the domestic stability buffer (DSB) to 3% from 3.5%. 
    The changes to the DSB, the additional capital the country's
big six banks must set aside to absorb losses during financial
stress, are applicable to Royal Bank of Canada  RY.TO  , TD Bank
 TD.TO  , BMO  BMO.TO  , Bank of Nova Scotia  BNS.TO  , CIBC
 CM.TO  and National Bank of Canada  NA.TO  and are effective
immediately, OSFI said.
The decision to lower the DSB after three years is supported by
the banks' "extraordinary loss-absorption capacity" for a range
of risks, OSFI said, and will unleash hundreds of billions of
Canadian dollars for lending. Banks could deploy capital more
aggressively and help boost the Canadian economy during a time
of global uncertainty related to trade negotiations with the
United States, restructuring of supply chains, and Middle East
geopolitics. 
"The opportunities are there for the banks and we're getting out
of the way," Peter Routledge, the regulator's superintendent,
said in an interview.
    "What we've done is provide clarity and certainty around
capital. And it's up to the banks to figure out how to deploy
it.... certainly one avenue is supporting the Canadian economy's
adjustment to this new environment," Routledge said. 
    The regulator also noted that despite the challenges,
unemployment, consumer delinquencies and credit losses have
stabilized in recent periods.
    In the latest quarter, the big banks all surpassed profit
expectations, helped by strong earnings at their domestic
businesses and capital market segments. The earnings were helped
by the banks' diversified model and underwriting practices,
which have helped slow loan impairments and credit losses.
    Canada's top six banks, which control roughly 90% of the
market, are among the most resilient financial institutions in
the world, having weathered financial crises and other episodes
that took a toll on banks in other regions.  
    However, executives at the six banks said the near-term
outlook for Canada hinges on trade talks with the U.S. and how
long the Middle East conflict persists, which will have an
impact on client demand, supply chain stability, and the
direction of monetary policy.
     
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(Reporting by Nivedita Balu in Toronto; Editing by Caroline
Stauffer, Kirsten Donovan)
((Nivedita.Balu@thomsonreuters.com ; +1-343-401-6776))