No Severe Stress, But Rising Risks: Domestic Stability Buffer Should Hold at 3.5 Percent

November 20, 2025 – The C.D. Howe Institute’s Domestic Stability Buffer Council (DSBC) recommends that the Office of the Superintendent of Financial Institutions (OSFI) maintain the Domestic Stability Buffer (DSB) for Canada’s largest banks at 3.5 percent of total risk-weighted assets at its next setting in December. 

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

The expert Council provides OSFI, industry participants, and economic policy leaders with an independent assessment of the appropriate size of the buffer in keeping with OSFI’s mandate of contributing to public confidence in the Canadian financial system.

At the DSBC’s November 12^th meeting, Council members assessed how Canadian economic and financial data have evolved since OFSI left the buffer unchanged in June. Members found that both macro and financial institution data showed positive and concerning developments and agreed that while the economy has been sluggish this year, there are no signs of severe stress in the financial system. Likewise, while underlying vulnerabilities remain elevated, they have not yet crystallized.

Looking ahead, members remain concerned over a major deterioration in the Canadian economy and reinforced the importance of keeping the buffer powder dry.

As a result of the data to date and members' view of near-term risks, the Council’s consensus was to hold the buffer steady. However, it noted that OSFI should be prepared to quickly release all or part of the buffer if Canadian economic conditions worsen to the point where major banks need more capital headroom to maintain the flow of credit.

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For more information contact: Jeremy Kronick, Chair of the Domestic Stability Buffer Council and Vice-President, Economic Analysis and Strategy, 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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The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

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