Canada's Office of the Superintendent of Financial Institutions has lowered the Domestic Stability Buffer for the country's largest banks to 3.0% of total risk-weighted assets and narrowed the buffer's operating range from 0-4% to 0-3%. OSFI announced the changes on 19 June 2026, and the lower buffer took effect the same day.
It is the first change to the DSB since June 2023, ending an extended period during which the regulator had held the buffer steady at 3.5%. OSFI said the recalibration was intended to give large banks flexibility to support the Canadian economy through shifts in technology, trade and geopolitics.
MORE ROOM FOR BANKS TO LEND
The Domestic Stability Buffer forms part of OSFI's CET1 expectation for Canada's six domestic systemically important banks, alongside the 4.5% minimum, the 2.5% capital conservation buffer and the 1% surcharge, and can be lowered in a downturn so that banks can absorb losses and continue to lend. OSFI said the banks' average CET1 ratio of 13.5% equates to a capital cushion of roughly CAD 74 billion above the new 11.0% expectation, or room for an expansion in risk-weighted assets of CAD 673 billion.
Narrowing the range from 0-4% to 0-3% lowers the top end at which OSFI can set the buffer; OSFI said this enables Canada's largest banks to deploy capital with enhanced flexibility.
OSFI said the move would let the largest banks deploy excess capital to support Canada's economic adaptation to shifts in technology, trade and geopolitics. OSFI said vulnerabilities in the financial system remain elevated and that it stands ready to adjust the DSB as conditions evolve.
FIRST DSB MOVE SINCE 2023
The buffer had last been changed in June 2023, when OSFI raised it by 50 basis points to 3.5%, citing high household and corporate debt levels, the rising cost of debt and increased global uncertainty. OSFI described Friday's cut as a measured and prudent step.
For Canada's six largest banks, OSFI's CET1 expectation falls to 11.0% of risk-weighted assets; OSFI said all currently exceed 13%, with an average of 13.5%. Superintendent Peter Routledge said OSFI anticipates the largest banks will use the capital release to invest in Canada's economy through this period of structural change.
OSFI's letter and supporting materials are available on the regulator's website. OSFI reviews and sets the DSB level twice a year, in June and December, and can adjust it at any time if conditions warrant.
OSFI said Canadian household indebtedness remains high relative to income although below historical peaks, house prices have declined but remain elevated relative to fundamentals, and delinquencies, unemployment and credit losses remain within historically normal ranges.
OSFI pointed to opportunities for bank lending in segments such as defence and security, critical infrastructure, resources and artificial intelligence.