Canada’s banking regulator imposed higher capital requirements on the country’s largest banks for the second time in about six months, a signal of concern about risks building up in the financial system.
Canada’s banking regulator imposed higher capital requirements on the country’s largest banks for the second time in about six months, a signal of concern about risksThe Office of the Superintendent of Financial Institutions said it’s lifting the domestic stability buffer to 3.5 per cent of risk-weighted assets from its current 3 per cent level. The regulator increased it by the same amount in December.
“Current vulnerabilities, including high household and corporate debt levels, the rising cost of debt, and increased global uncertainty around fiscal and monetary policy, coupled with Canada’s financial sector showing strength throughout the winter and spring has presented the opportunity for OSFI to build more resiliency in the system,” the bank watchdog said in a statement.
OSFI sets the stability buffer based on its view of financial vulnerabilities, including levels of household and corporate debt and economic forecasts. Elevated office vacancies are also raising concerns that banks may be forced to take losses on commercial real estate loans. Commercial property represents about 10% of the loan
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