DSB Council Sees Rising Risks but Stops Short of Calling for Buffer Cut

June 3, 2026 – In a split vote, the C.D. Howe Institute’s Domestic Stability Buffer Council (DSBC) recommended that the Office of the Superintendent of Financial Institutions (OSFI) maintain the Domestic Stability Buffer (DSB) at 3.5 percent at this month’s setting. Four of the seven Council members voted to hold the buffer steady, while three members believed economic conditions had worsened enough to justify a cut.

The domestic stability buffer is the capital that Canada’s largest banks must set aside to absorb losses during periods of financial stress. The buffer applies to the country’s six domestic systemically important banks: RBC, TD, Bank of Montreal, Scotiabank, CIBC, and National Bank.

Council members agreed that the macroeconomic and geopolitical backdrop has worsened meaningfully since their previous meeting, citing the conflict involving Iran, higher energy prices, inflation above target, and ongoing trade uncertainty. But a slim majority concluded that there remains a lack of evidence that banks are not meeting current demand or that credit conditions have deteriorated enough to justify releasing the buffer.

While recommending that OSFI leave the buffer unchanged, the Council unanimously stressed that OSFI should remain prepared to act should financial-system stress begin to materially impair credit availability to households and businesses. Several members noted that, if conditions were to worsen substantially, a rapid and significant reduction in the buffer could become appropriate before OSFI’s next scheduled review in December.

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For more information contact: Jeremy Kronick, Chair of the Domestic Stability Buffer Council and President and CEO, C.D. Howe Institute; and Raquel Schneider, Communications Officer, C.D. Howe Institute, 647-805-3918, rschneider@cdhowe.org.   

The mission of the Centre on Financial and Monetary Policy at the C.D. Howe Institute is to be the foremost hub of influence and direction on critical and emerging issues in both financial services and monetary policy. It aims to improve the design and awareness of public policy in the areas of financial and monetary policy by providing best-in-class scholarship and insights that Canadians can trust.

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