OSFI to Make Next Domestic Stability Buffer Decision Amid Elevated Uncertainty

The Office of the Superintendent of Financial Institutions (OSFI) will make its next semiannual Domestic Stability Buffer (DSB) rate setting announcement on December 17, 2024.

Key highlights include the following:
-- We expect OSFI to maintain the DSB at 3.5% in its December 2024 rate-setting announcement.
-- In our view, systemic vulnerabilities and near-term risks to the domestic systemically important banks (D-SIBs) remain largely unchanged from OSFI's last DSB review in June 2024, at which time the DSB was maintained at 3.5%.
-- Although the Canadian economy and the financial performances of the D-SIBs have been relatively stable, significant uncertainty remains, making OSFI's decision somewhat more difficult to predict.

"The outlook for the DSB is clouded by macroeconomic uncertainty, and the full picture of D-SIB capital is further complicated by OSFI's proposed implementation timeline for the revised output floor," said Josh Veenkamp, Assistant Vice President, North American Financial Institution Ratings. "However, the large Canadian banks remain well capitalized as of Q4 2024, with capital buffers comfortably above the current regulatory minimum threshold of 11.5% and sufficient to absorb potential credit losses."