On December 8, OSFI announced that it will maintain the Domestic Stability Buffer (DSB) at 3.5% of total risk-weighted assets, a level announced in June 2023 and in effect since November 1, 2023. Accordingly, OSFI expects all systemically important banks to target a Common Equity Tier 1 ratio of at least 11.5% of risk-weighted assets.

While no credit unions are impacted by this change, the maintenance of the DSB is notable given our current economic climate.

OSFI elected to hold the DSB at its current level because Canada’s six largest, or systemically important, banks have each reached a level of reserve capital that is sufficient to absorb losses if current vulnerabilities materialize into actual losses.

OSFI noted that it will continue to closely monitor financial system developments in Canada and abroad. If financial system vulnerabilities materialize into actual losses, OSFI could lower the DSB. If vulnerabilities intensify from today’s levels, OSFI could raise the DSB to a level no higher than the top of the current range of 0% to 4%.