OSFI Deputy Superintendent Outlines Reforms Easing Capital Rules and Streamlining Supervision

Key Takeaways

• At the IIF-CBA Canada Forum 2026, OSFI Deputy Superintendent Angie Radiskovic described a sustained modernization agenda.
• It includes an indefinite pause on key Basel III elements, a lower Domestic Stability Buffer, reduced risk weights for SME and construction exposures, and a more tailored supervisory approach.
• Compliance teams should treat these remarks as signals of OSFI's calibration priorities and update capital planning, supervisory engagement, and regulatory change monitoring accordingly.

Deep Dive

At the IIF-CBA Canada Forum 2026, OSFI Deputy Superintendent Angie Radiskovic described a sustained modernization agenda. It includes an indefinite pause on key Basel III elements, a lower Domestic Stability Buffer, reduced risk weights for SME and construction exposures, and a more tailored supervisory approach. Compliance teams should treat these remarks as signals of OSFI's calibration priorities and update capital planning, supervisory engagement, and regulatory change monitoring accordingly.

The message is that modernization does not reduce prudential standards. Instead, OSFI aims to make requirements clearer, more proportionate, and more targeted. Growth and competition are described as relevant considerations within OSFI's prudential mandate, though they do not replace its focus on soundness and financial stability. Compliance teams should expect continued recalibration of requirements, alongside sustained scrutiny of risks such as integrity and security.

Several concrete changes were cited. On capital, OSFI has indefinitely paused key elements of the final Basel III reforms (the "Basel Endgame"). In June it lowered the Domestic Stability Buffer to 3.0%. In the final Capital Adequacy Requirements Guideline, OSFI:
- Cut the risk weight for unrated corporate SME exposures to 75% from 85%.
- Lowered the base risk weight for low-rise residential real estate to 130% from 150%.
- Introduced a 90% risk weight for residential Acquisition, Development and Construction (ADC) exposures where pre-sales are 75% or higher.
- Allowed ADC projects with loan-to-value ratios below 80% to receive income-producing commercial real estate treatment once a certificate of occupancy is issued.

Also in June, OSFI launched a Streamlined Approvals Framework giving eligible new entrants, including innovative banking models and credit unions, a faster and more predictable path to federal regulation.

Process and supervisory changes also matter. OSFI began its policy review in November 2024, rescinded 20 guidelines, and removed 32 documents from the guidance library. It now issues guidance, consultations, and announcements on predetermined dates through Quarterly Release and Industry Days. Under the Supervisory Framework Renewal, supervision is becoming more risk-based, tailored, and data-driven ("SMART supervision"). The Deputy Superintendent is also resetting the supervisory agenda, including a review of OSFI's risk appetite statement. Coordination with provincial regulators is being strengthened through the Heads of Agencies Committee. FINTRAC's inclusion in the Financial Institutions Supervisory Committee enables senior-level dialogue on AML issues. No compliance deadlines were stated, though the Quarterly Release dates set a predictable calendar.

Recommended actions:
- Map rescinded guidelines and removed documents against internal policies, controls, and attestations to retire or update obsolete references.
- Have capital and finance teams quantify the effects of the new risk weights and the 3.0% buffer, and revisit capital planning, ICAAP assumptions, and pricing for SME, construction, and residential lending.
- Align regulatory change calendars to Quarterly Release and Industry Days.
- Prepare for more targeted, data-driven supervisory interactions, ensuring data quality and readiness.
- Keep AML and integrity and security controls strong, since coordination between OSFI and FINTRAC is increasing.
- Monitor the risk appetite statement review and any future decision on Basel III.

Overall, the near-term risk is mixed. Capital relief eases constraints on lenders but raises the risk of credit underwriting and concentration weaknesses, particularly in ADC and SME portfolios. The indefinite Basel pause creates uncertainty and potential divergence from international peers. Institutions should not read the reforms as lower supervisory expectations for risk management, governance, and AML.

Source: Office of the Superintendent of Financial Institutions