pc
nid 91917
Apr 14, 2026
ataylor@vixio.com
Canada
Office of the Superintendent of Financial Institutions
financial services
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1757 charsCanada's Financial Regulator Reintroduces Non-Bank Financial Institution Risk in Annual Risk Outlook
On April 14, 2026, the Office of the Superintendent of Financial Institutions (OSFI) released its 2026-2027 Annual Risk Outlook (ARO), identifying the top risks facing Canada's financial institutions and outlining supervisory and regulatory responses.
The ARO highlights three key risks: real estate secured lending (RESL) risk, non-bank financial institution (NBFI) risk, and liquidity and funding risk. NBFI risk has been reintroduced as a priority following expansion of risks outside the traditional banking system, particularly as non-bank lenders and investment funds increase borrowing. Housing and mortgage pressures have intensified in certain regions, while global uncertainty poses potential threats to funding market confidence. Although funding cost and availability have remained stable, OSFI notes that the speed at which liquidity events could unfold remains a significant concern.
OSFI is recalibrating regulatory capital requirements to align with evolving risks, with risk weights in certain areas potentially increasing or decreasing over time. The regulator characterises these adjustments as normal maintenance to maintain balance between risks and capital levels.
OSFI is developing a comprehensive Credit Risk Management (CRM) Guideline to strengthen how institutions manage credit risk, with consultation closing on July 29, 2026. Revisions to liquidity adequacy requirements targeting specific retail deposit categories take effect May 1, 2026. A consultation on the Internal Liquidity Adequacy Assessment Process (ILAAP) will launch on May 21, 2026, considering industry proposals to improve risk sensitivity.
The ARO is published annually in spring, with potential fall updates if financial system risks evolve significantly.
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2812 charsCanada Office of the Superintendent of Financial Institutions Publishes Annual Risk Outlook for 2026-2027
On April 14, 2026, the Office of the Superintendent of Financial Institutions (OSFI) released its Annual Risk Outlook 2026–2027, outlining key risks to the Canadian financial system and the supervisory and policy actions intended to address ongoing concerns.
Key Risks and Related Regulatory Actions
Real Estate Secured Lending (RESL) Risks: OSFI highlights continued vulnerability in real estate secured lending due to mortgage renewals and affordability pressures, driven by growth in private credit and less-regulated lending channels. OSFI commits to conducting supervisory reviews of lenders with significant RESL exposures to determine the effectiveness of controls and risk management standards.
Non-bank Financial Institution (NBFI) Risks: OSFI noted that regulators internationally are concerned about the spread of risk from NBFIs to the broader financial system. In response, OSFI is developing a new Credit Risk Management (CRM) Guideline, which aims to strengthen credit risk management, consolidate credit risk-related expectations, and respond to key questions regarding emerging credit risk areas, including NBFIs. OSFI will also recalibrate capital requirements to strengthen underwriting discipline and loss-absorbing capacity. OSFI also reiterates its efforts to continue research into the relationship between NBFIs and other financial institutions under OSFI oversight, including additional focus on corporate lending activities that OSFI views as key contributors to NBFI-related risk.
Liquidity and Funding Risk: While liquidity conditions remain stable, OSFI warns of faster-moving stress scenarios and potential funding shocks, prompting targeted updates to the liquidity adequacy framework, including rule changes effective May 1, 2026 (targeting specific retail deposit categories), additional consultations on May 21, 2026, and continued refinement of liquidity metrics and assumptions.
Technology, Cyber, and Integrity: Increasing reliance on digital infrastructure is elevating risks related to cybersecurity, third-party dependencies, AI/model risk, fraud, and illicit activity. OSFI is responding by expanding supervisory expectations around technology governance, requiring stronger controls, monitoring, and risk management frameworks across institutions. OSFI also plans to issue a third-party data call to provide insights into trends and vulnerabilities concerning third parties.
Forward-Looking Risk Environment: Broader economic uncertainty and geopolitical factors continue to shape OSFI’s risk outlook, leading to a more proactive supervisory approach, expanded focus on interconnected and non-bank risks, and a pipeline of ongoing policy work, including a July 29, 2026 deadline for CRM Guideline feedback and continued regulatory updates throughout 2026 and 2027.