The Office of the Superintendent of Financial Institutions (OSFI) has maintained the buffer—which determines how much capital banks must set aside to help guard against economic shocks—at its current level since June 2023, despite the uncertain state of Canada’s economy. (The Logic)

Talking point: The Big Six continue to run CET1 ratios—a measure of a lender’s ability to absorb losses—well above OSFI’s regulatory minimum of 11.5 per cent, averaging 13.6 per cent across the sector in the fourth quarter. That’s extra capital that lenders could deploy into the economy. But OSFI superintendent Peter Routledge told The Logic he does not view the surplus as a concern, emphasizing the value of elevated cushions should the economy weaken next year. Routledge also said OSFI does not see its role as directing how banks deploy their capital. “If conditions aren’t as advantageous in three, six, or 12 months, we’re prepared to lower the [buffer] to help the system absorb the costs and continue to operate,” he said in a media briefing on Thursday.

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