The Office of the Superintendent of Financial Institutions pledged on Wednesday to keep Canada's domestic stability buffer at 3% until Superintendent Peter Routledge's term expires in June 2028, ruling out further adjustments to the capital requirement governing the country's six largest banks. Speaking at a conference hosted by Bank of Nova Scotia, Routledge said the commitment was intended to give lenders "capital-planning certainty" over a multi-year horizon. "I'm superintendent. I make the final decision. You can take 3% to the bank. It will stay there. We are not changing it," he said. The pledge fixes the buffer at the level set in June, when OSFI cut it by 50 basis points in the first change to the requirement in three years. Canada's largest banks are consequently required to maintain Common Equity Tier 1 capital of at least 11% of risk-weighted assets.
The domestic stability buffer functions as a reserve that Canada's systemically important banks must hold against domestic vulnerabilities, and OSFI reviews it semi-annually. The June reduction, which took the buffer from 3.5% to 3%, was framed by the regulator as a measure to give the six largest lenders greater flexibility to deploy capital, with OSFI citing room to support lending tied to defence spending, infrastructure and artificial intelligence — sectors central to Ottawa's economic strategy. Routledge told the summit that the risk environment in Canada has "fundamentally changed." Unlike the pandemic period, when OSFI restricted dividend increases and share buybacks, the regulator has imposed no conditions on how banks use the freed-up capital.
CAPITAL ALLOCATION LEFT TO BANK BOARDS
Routledge was explicit that the decision on deploying released capital rests with bank boards rather than the supervisor. "You should never rely on a regulator to allocate capital. We are not built for that," he said. The superintendent has previously drawn attention to the excess capital held across the Big Six and indicated a preference for more lending to support economic growth, but stopped short of directing outcomes. The distinction matters because the June cut freed up billions of dollars in deployable capital without any accompanying supervisory expectation on its use.
Bank executives at the same conference set out priorities that lean toward growth and shareholder returns. Scotiabank chief executive Scott Thomson described his firm's approach as "organic growth first, share repurchase second," while TD Bank's Raymond Chun said his company has the capacity for "significant buybacks." Royal Bank of Canada and Bank of Montreal also signalled plans to continue returning excess capital through repurchases, with executives generally favouring organic expansion and buybacks over large-scale acquisitions. National Bank of Canada characterised the buffer reduction as a growth signal rather than a trigger to accelerate repurchases.
BANKS HOLD CAPITAL WELL ABOVE MINIMUMS
All six major Canadian banks comfortably exceed the 11% CET1 minimum, and several are holding capital well above it as a hedge against trade-related uncertainty. Royal Bank of Canada chief executive Dave McKay said the bank is maintaining a CET1 ratio of 13.5%, describing it as an additional buffer against the potential effects of the trade war with the United States. National Bank is targeting 13% for the end of 2027, while CIBC said it expects capital to remain elevated in the 13% range in the near term. Bank chief executives at the summit maintained generally positive credit outlooks despite escalating Canada-US trade tensions, while taking precautionary steps.
The buffer commitment arrived alongside OSFI's third Quarterly Release of 2026, published on Thursday, which advanced policy work across capital, disclosure, concentration risk, crypto-asset exposures, interest rate risk and insurance reporting — largely finalising previously issued draft guidance. That release included the final Capital Adequacy Requirements Guideline (2027), a streamlined approval process for small and medium-sized banks adopting the internal ratings-based approach to credit risk, and the final guideline on capital and liquidity treatment of crypto-asset exposures. OSFI will hold a virtual Industry Day on 24 September 2026 for stakeholder questions. Attention now turns to whether the capital-planning certainty translates into the lending growth the regulator has signalled it would prefer, or primarily into share repurchases.