Regulator signaled confidence in big banks even as household debt stayed elevated
The federal banking regulator kept its key capital buffer for the country’s largest banks unchanged, reinforcing a message that risks to the system have remained high but manageable even as borrowers worked through a bruising renewal cycle.
The Office of the Superintendent of Financial Institutions (OSFI) held the Domestic Stability Buffer (DSB) at 3.5% of riskâweighted assets for Canada’s six systemically important banks, a level first set in June 2023 and now equivalent to about $60 billion in extra capital.
Canada’s biggest lenders continue to post Common Equity Tier 1 ratios well above OSFI’s 11.5% expectation, averaging 13.6%.
According to Carl De Souza of Morningstar DBRS, Q4 profits for Canada's Big Six Banks were driven by capital markets and wealth management, while impaired loans rose as expected.https://t.co/uorJYAuIa4
— Canadian Mortgage Professional Magazine (@CMPmagazine) December 8, 2025
Household debt stayed high, but pressures shifted
OSFI said key vulnerabilities - including household leverage, corporate debt and market valuations - remained “elevated but stable,” helped by softer housing conditions and moderating credit growth.
"Canadian household debt, relative to income, remains high but relatively stable and below historical peaks given softer conditions in the housing market," the regulator said.
For mortgage borrowers, those system-level numbers sit against an intense renewal wave. More than two million mortgages are set to renew between 2024 and 2026.
Buffer decision tied to stress tools and new caps
OSFI said it views a 3.5% buffer as proportionate to current risks and does not expect to raise the DSB as long as vulnerabilities stays stable or eased.
The regulator also reiterated that it would cut the buffer if threats crystallized, releasing capital so banks could absorb losses and keep lending.
"OSFI uses the DSB tool to ensure Canada's six systemically important banks hold capital that is appropriate for the level of risk in the financial system. This underpins the resilience of Canada's financial sector," superintendent Peter Routledge said.
"Today, Canada's six largest banks hold capital levels well above supervisory expectations. This enables them to provide core banking services to the Canadian economy throughout the business cycle."
The decision came as OSFI layered new tools onto the long-standing mortgage stress test. In January, the regulator introduced a loan-to-income cap that limited federally regulated lenders to issuing no more than 15% of quarterly originations to borrowers whose mortgage debt exceeded 450% of income.
Routledge later described the measure as applied “at the institutional level rather than on individual mortgage loans” to avoid distorting specific business models.
What it meant for lenders and brokers
For lenders, the steady buffer reinforces a status quo in which the Big Six and credit unions have expanded their share of new mortgage originations. For brokers, heightened capital and underwriting discipline coincide with more switching at renewal and rising demand for non-bank options as borrowers searche aggressively for rate relief and flexibility.
A steady DSB, tighter income-based limits and still-elevated household debt point to an environment where system resilience looks solid, but where broker clients, especially highly leveraged households, face a long, delicate adjustment rather than a quick reset.
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