Bank Capital Rules: How Much Safety Cushion Should Banks Hold?

Official title: Final Capital Adequacy Requirements (CAR) Guideline (2026)

Closed Regulations & Permits Finance & Consumer
Canada's banking regulator updated rules on how much capital banks must hold to protect depositors. The changes clarify how banks calculate risk for different types of loans, including mortgages. One key decision: Canada is pausing increases to a global banking standard called the "Basel III floor" because other countries haven't adopted it yet.

Why This Matters

Your savings account, mortgage, and retirement funds all depend on banks staying solvent. These rules determine how much cushion banks must keep to absorb losses. If banks hold too little capital and make bad bets, your deposits could be at risk—like what happened in the 2007 financial crisis.

What Could Change

Banks will follow updated rules for calculating risk on mortgages and other loans. The "output floor"—a minimum capital requirement—stays at 67.5% instead of rising. Banks will get at least two years' notice before any future increases. References to the now-defunct CDOR interest rate benchmark are being removed.

Key Issues

  • How should banks calculate capital requirements for combined loan products like mortgages with lines of credit?
  • Should Canada pause Basel III capital floor increases while other countries lag behind?
  • How should income-producing residential real estate exposures be defined and treated?

How to Participate

  1. Review the Capital Adequacy Requirements (CAR) Guideline and the SMSB Capital and Liquidity Requirements Guideline.
  2. Submit feedback to consultations@osfi-bsif.gc.ca. Note: This consultation is now closed.

What Happened

The final Capital Adequacy Requirements Guideline was published on November 20, 2025 following the 60-day consultation. Key decisions include deferring increases to the Basel III standardized capital floor until further notice, with the output floor remaining at 67.5%. OSFI committed to providing at least two years' notice before resuming any increases.

View Final Decision

Key Documents