Canada’s banking regulator is telling the country’s largest lenders to lean into smart risk taking and put more money to work in the real economy.
Peter Routledge, who leads the Office of the Superintendent of Financial Institutions, said the watchdog is open to adjusting capital and liquidity requirements so banks can expand business lending without compromising resilience.
We want them to take smart risks, Routledge said in a recent interview, adding that OSFI is prepared to revisit how certain exposures are treated under the rules.
Household mortgages have come to dominate bank balance sheets after decades of rising home prices and population growth.
By Routledge’s tally, the mix has flipped from the 1980s, when business loans outweighed mortgages, to today, when roughly three quarters of lending is tied to housing.
OSFI’s message is that a healthier split would better support growth, productivity, and investment in everything from factories and data centers to energy and transportation.
OSFI has indicated it could refine the capital treatment of specific types of commercial loans, with potential changes ready for November that is meant to make some forms of lending more economical without lowering guardrails that protect depositors and the system.
The timing aligns with a broader policy theme from Ottawa that aims to mobilize private capital for industrial and infrastructure priorities while keeping risk management tight.
Royal Bank of Canada, Toronto-Dominion, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, and National Bank of Canada collectively hold tens of billions of dollars in surplus capital above current buffers.
OSFI has spent the past two years reinforcing cushions to absorb credit losses, including a domestic stability buffer set to guard against systemic shocks with those firebreaks in place and loan performance still manageable, the regulator is signaling that some of that excess capacity can fund productive investment rather than sit idle.
Executives have spent the past year navigating slower domestic growth, sticky funding costs, and lingering uncertainty around commercial real estate. Some will be cautious about chasing loan growth if the macro backdrop stays choppy.
Others may prioritize buybacks or technology spending over expansion in risk weighted assets that tension helps explain why OSFI’s framing stresses smart rather than more risk.
The regulator wants banks to deploy capital where it supports long term productivity and capacity, not to loosen standards indiscriminately.
OSFI has been pruning older guidance and signaling a willingness to streamline where rules no longer fit market realities.
It has also refreshed expectations around model risk management and continues to spotlight wholesale credit, liquidity, and real estate as core watchpoints in its annual risk outlook.
Any November package that sweetens the economics of select business loans will likely arrive with clear expectations about how banks monitor concentrations, validate models, and hold contingency liquidity.
OSFI is now telling Bay Street to take that shot, provided it is aimed with care.
