(Ottawa) The federal banking regulator on Friday kept the domestic bank stability reserve at 2.5%, noting that the economic recovery continues and Canada’s largest banks continue to demonstrate strong financial resilience.
The Office of the Superintendent of Financial Institutions (OSFI), which reviews the rate on this reserve twice a year, announced in June that it was increasing it to its current level as of October 31.
In announcing its decision, OSFI explained that the financial system is still highly vulnerable to certain systemic risk factors, such as household debt and the imbalance of assets in the housing market.
The rate of the domestic stability reserve, which was reduced to 1.0% at the onset of the pandemic, forces Canada’s largest systemically to set aside when times are good. These funds can possibly be requested in case of need.
OSFI last month announced it was lifting restrictions that prevented federally regulated banks and insurance companies from raising dividends, repurchasing shares and increasing executive compensation.
These bans were put in place at the start of the pandemic, in response to fears about the economic slowdown and the possibility that large numbers of people could find themselves in default.