Peter Routledge, Superintendent of Financial Institutions, delivered remarks and participated in a fireside chat at the Economic Club of Canada Français

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Office of the Superintendent of Financial Institutions

Oct 10, 2025, 15:00 ET

TORONTO, Oct. 10, 2025 /CNW/ - On October 10, 2025, Peter Routledge, Superintendent of Financial Institutions, delivered remarks and participated in a fireside chat at the Economic Club of Canada in Toronto, Ontario.

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Thanks very much for the kind introduction. The Economic Club of Canada provides a highly respected, non-partisan platform for leaders in the private and public sectors to provide their views and answer direct, topical questions. With that in mind, I will make a few opening remarks then do my best to answer Robert's and your questions.

I have the privilege of serving as Superintendent of Financial Institutions. I lead an office of dedicated public servants to whom Parliament has assigned a specific and narrow mandate: to ensure Canada's financial institutions are resilient in the face of uncertainty and volatility. Parliament further narrows our focus to protecting the rights and interests of depositors, policyholders, and creditors having due regard to the need to allow financial institutions to compete effectively and take reasonable risks.

We do this via two central activities. First, we write and promulgate principles for reasonable risk taking in a competitive marketplace via regulatory guidelines. And, second, we supervise financial institutions to measure their adherence to these principles.

If we carry out these activities effectively, the Canadian financial institutions that we oversee will be resilient to the trials produced by uncertainty and volatility. We take our responsibility very seriously given the importance of the financial sector to Canada's economic fortunes. The institutions we supervise carry approximately $12.2 trillion in assets on their balance sheets – not an insignificant figure given Canada's $3.2 trillion economy.

Resilience and Risk in Today's Financial System

I have spoken recently about the resilience Canadian financial institutions have built over the past several years. For example, Canada's systemically important banks reported Common Equity Tier 1 (CET1) ratios that averaged 13.7% in the most recent quarter, 220 basis points above the floor for a well-capitalized, systemically important bank. Elsewhere, Canadian life insurers have boosted their core capital ratios by 13% over the past 6 years and maintain ample capital buffers that can be similarly leveraged for new investments in the Canadian economy.

And yet, I think it is fair to say that the uncertainty facing Canada and its financial sector is unusually elevated. First some good news…given the resilience in the financial system, this new era we have entered does not feel to me like the first decade of this century – the decade that housed the Global Financial Crisis (GFC). Yes, I worry about market valuations that are quite elevated relative to most cycles. And yes, I worry about innovative non-bank financial intermediaries whose business models have yet to be tested by a nasty bear market. But regulated financial institutions in Canada, have stronger capacity to withstand or recover quickly from unexpected difficulties, stronger than they had during the GFC.

Second, lets discuss the risks that do threaten financial stability. We are living through an intense period of geo-political transformation. The post-Cold-War consensus about the economic benefits produced by free-trade between independent nations has frayed and will not survive in the form to which we have grown accustomed. Other risks have accompanied this transformation and some of those risks threaten financial institutions. For example, cyber criminals regularly attack financial institutions and, occasionally, succeed. Transnational criminal organizations that manufacture and distribute poison conduct kinetic attacks on the physical assets of financial institutions via their money laundering activities.

Simultaneously, regulated financial institutions have understandably begun to raise questions about the post-GFC conservatism of regulators in building more resilience into financial institutions. They argue that the shift before us demands more intelligent risk-taking, risk-taking to help economies shift their economic model to the world emerging, and they argue the aforementioned conservatism is an unnecessary speed-bump in the way of progress. We at OSFI, as at our international peers, regularly field calls to lower capital requirements, loosen some non-financial standards, and lessen regulatory intensity.

In other words, my regulated constituents are asking me: can OSFI listen to and act upon our sincere request to help us help Canada adapt to our new reality. The correct answer to that question is yes. Not yes, but … just yes.

Smart Supervision to Avoid the "Stability of the Graveyard"

In fact, we started answering yes before these calls intensified and, in my view, before they even started. For example, in 2024, we rescinded 20 guidelines and industry advisories, with more to come this November, then more again in January 2026, and more again in May 2026. Over the next year, OSFI will deliver the most wide-ranging and comprehensive reduction of regulatory content in our history.

Earlier this year, we paused increases in the Basel III output floor to ensure that competitive balance prevails for Canadian banks that compete in the international banking system. In July 2025, we announced a reduction in capital requirements for Canadian infrastructure debt and equity investments made by OSFI-regulated life insurers.

We have sought out ideas to improve our capital requirements that will provide more opportunity to regulated lenders and investors at minimal cost to financial institution resilience. We intend to have a first round of ideas put forward later this fall.

We have no intention of being revolutionary in this endeavour…just incremental and smart. We think there is an optimum level of regulation and supervision – one that lessens the likelihood that a financial shock damages the economy but avoids the "stability of the graveyard," (a term I borrow from my colleague at the Bank of England, Sarah Breeden, in her speech Financial stability at your service) in which economic growth is unnecessarily slowed by an excessive aversion to financial system risk. And that optimum level changes with the times.

We also are keenly aware of the reality that we could go too far, and unintentionally invite unproductive risk-taking into the system. For example, some have called for a narrowing of financial institution supervisors' aperture to just financial risks, arguing that only material financial risks pose threats to financial institutions.

Unshakeable Commitment to Supervising Material Non-financial Risks

Now, financial risks such as capital adequacy and liquidity remain critical areas of focus for OSFI but we have learned through hard experience that they are lagging indicators of financial instability. Experience teaches us that inadequate assessment of non-financial risks is usually the root cause of financial instability at an institution.

Non-financial risks can undermine the rights of depositors, policyholders, and creditors of financial institutions. Moreover, financial risks often emerge as the final signals of that process. Therefore, non-financial risks are, in fact, material risks and OSFI must supervise and regulate them in a manner equivalent to its supervision and regulation of financial risks.

As a creditor or lender to a financial institution, ask yourself this: can I truly find comfort in my financial institution's capital or liquidity ratios, if I have concerns about its cyber risk management, third-party risk management, the integrity of its leaders, the security of its physical and information assets, its fidelity in adhering to the laws in the jurisdictions in which it operates, the culture of the organization, and the strength of governance provided by its board of directors?

Financial history is littered by companies that failed on these dimensions even though their financial indicators did not signal the severity of their problems, near to or until the last day of their existence. If you are not persuaded by this argument, please solicit the points of view of those institutions' former creditors…or… their former shareholders.

OSFI's Natural Allies: Boards of Directors

And with this penultimate point, I arrive at the final message for this speech. The fundamental importance of a financial institution's board of directors in vouchsafing both the resilience of the institution and its ability to deliver benefits to creditors and shareholders alike.

If we look objectively at the performance of Canada's financial system this century, I think we can conclude that the system has outperformed many other financial systems on the dimensions of financial stability and resilience. Institutional failure has been quite rare, and our financial system has come through periods of serious to severe financial uncertainty without material disruption and with attractive profitability for shareholders.

Credit for this track record does not belong to OSFI. We supervise nearly 400 financial institutions. Meanwhile, each of those institutions has a board of directors focused on value creation for its shareholders. Therefore, in attributing credit for Canadian financial institution performance, I start with the boards of directors of Canadian financial institutions who oversee management each and every day.

In fact, in the 4.5 years that I have served as Superintendent, I have deepened my appreciation of an enduring truth of supervision and regulation. OSFI, as the representative of creditor interests, shares common interests with boards of directors. OSFI seeks long-term resilience for the benefit of creditors, depositors, and policyholders. Boards of directors seek the same long-term resilience in the service of their shareholders. Healthy profitability is good for creditors, strong capitalization and liquidity are good for shareholders. Except in extreme circumstances, creditor and shareholder interests align…making OSFI supervisors and boards of directors natural allies.

So, over the past three years, OSFI has redesigned its supervisory framework to better serve boards of directors. We have expanded our risk ratings considerably. Formerly, we gave just one over-arching risk assessment to boards of directors – we graded a company's overall risk as low, or moderate, or high, etc. Now we provide four sub-grades for each institution: grades for (1) business risk, (2) risk governance, (3) financial resilience, and (4) operational resilience. We provide boards with an annual report card, informing them of their institutions' strengths and weaknesses across those dimensions, as well as of their overall risk profile. We also provide much more clarity on the direction of risks. This gives boards of directors clear guidance on where to focus their own scrutiny on the management of the organization while enabling OSFI to avoid surprising our regulated constituents.

Now, this can feel like intensified regulatory intensity. We are much more critical and specific in our supervision which in turn obliges action on the part of management as guided by their boards. But that action is not in response to OSFI's views, we have found. In fact, it is the boards of directors, empowered by analysis from a stakeholder that shares their interests, that galvanize management response and, ultimately, improvement.

At OSFI, we rely on boards of directors to fulfil the important role as insightful, watchful stewards over their institutions' franchise values, especially when risks intensify. We know that when they do that…not only do they serve their shareholders well, they also help OSFI to protect the rights and interests of depositors, policyholders, and creditors. Moreover, board accountability and effective governance is certainly not a new expectation but remains paramount in our renewed supervisory approach. When the history of this era of OSFI is written, I think our supervisory renewal and matured attitude to the interests we share with boards of directors will go down as the difference maker in the resilience of Canada's financial system.

Moderator:

Given the evolving macroeconomic and geopolitical landscape, how does OSFI currently assess the risk environment facing federally regulated financial institutions, and what are the most notable shifts or emerging risks since the publication of the 2025-2026 Annual Risk Outlook in March 2025?