Canadian Regulator Confirms Buffer Will Remain Steady at 3%

Canada's banking regulator has confirmed that the domestic stability buffer will remain at 3%, providing lenders and investors with capital-planning certainty. Speaking at a Bank of Nova Scotia conference, Peter Routledge, superintendent, stated that he wants to give lenders 'capital-planning certainty' and emphasized that the current buffer is not changing.

Routledge noted that his term ends in June 2028, but reiterated that there are currently no limits on how banks deploy excess capital. Canada's largest banks must hold at least 11% Common Equity Tier 1 capital against risk-weighted assets and are all comfortably above this floor.

The regulator has indicated a preference for increased lending to support economic growth, while stressing that boards - not regulators - determine how capital is allocated. Several bank CEOs have also expressed their priorities, with Scotiabank's Scott Thomson stating 'organic growth first, share repurchase second', and Royal Bank of Canada and Bank of Montreal intending to funnel surplus capital back to investors via share buybacks.