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# OSFI Maintains Domestic Stability Buffer at 3.50% Following Semi-Annual Review
- URL: https://www.theglobalbanker.com/osfi-maintains-domestic-stability-buffer-3-50-percent-semi-annual-review-june-2024/
- Published: 2024-06-18T09:21:00.000Z
- Updated: 2026-10-02T12:57:04.000Z
- Description: Canada's OSFI held the Domestic Stability Buffer at 3.5% of risk-weighted assets for its six largest banks after its June 2024 review, citing persistent systemic vulnerabilities.
- Author: TGB Editorial Team
- Tags: Regulations, Americas, #archive

The Office of the Superintendent of Financial Institutions announced on 18 June 2024 that it would maintain the Domestic Stability Buffer at 3.50% of risk-weighted assets for Canada's six domestically systemically important banks, following the conclusion of its semi-annual review. The decision leaves the buffer unchanged at the level announced in June 2023 and in effect since 1 November 2023 and keeps the combined supervisory Common Equity Tier 1 expectation for the affected institutions at 11.50%.

The DSB is a capital tool specific to the Canadian regulatory framework, designed to require the country's largest banks to hold a buffer of loss-absorbing capital above the Basel-derived minimum requirements that can be drawn down in periods of system-wide stress. The mechanism is intended to ensure that the banking sector retains sufficient resilience to absorb losses during financial dislocation without curtailing lending to households and businesses.

#### OSFI RISK ASSESSMENT

OSFI concluded that the systemic vulnerabilities that had prompted the elevation of the buffer to its current level had not receded sufficiently to justify a reduction. The regulator's assessment encompasses a range of risk factors that it monitors on an ongoing basis, including household indebtedness — which remains elevated in Canada relative to international peers — the risk posed by mortgage renewals at higher interest rates, commercial real estate lending, and broader macroeconomic and geopolitical uncertainty that could affect the operating environment for the domestic banking system.

The six banks subject to the DSB requirement are the Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and Toronto-Dominion Bank — the group formally designated as Canada's domestically systemically important banks. 

#### CET1 EXPECTATION HELD AT 11.50%

With the DSB held at 3.50%, the combined supervisory CET1 expectation for Canada's D-SIBs stands at 11.50%, incorporating the 4.5% CET1 minimum, the 2.5% capital conservation buffer, the 1% D-SIB surcharge and the 3.5% DSB. OSFI said the D-SIBs are expected to remain vigilant and prudent in their capital management practices, consistent with the elevated uncertainty in the outlook.

OSFI reviews the DSB at semi-annual intervals and retains the flexibility to adjust the level at any review point in response to a material change in the systemic risk environment, either upward if risks intensify or downward if conditions improve sufficiently.