The Office of the Superintendent of Financial Institutions (OSFI) released its Annual Risk Outlook for the 2024-2025 fiscal year, outlining significant risks and strategic responses to ensure financial stability. The report addresses elevated interest rates, rising household debt, wholesale credit stress, and geopolitical uncertainties. To tackle these challenges, OSFI focuses on monitoring mortgage lending, assessing wholesale credit exposures, and enhancing liquidity risk management. The outlined regulatory priorities aim to maintain the resilience of Canada's financial institutions and pension plans.
Key Risks Identified:
- Elevated interest rates potentially impacting loan affordability and financial stability.
- Rising household debt costs leading to increased financial stress among consumers.
- Wholesale credit stress due to economic uncertainties and market volatility.
- Geopolitical uncertainties affecting global financial markets and economic conditions.
OSFI Responses:
- Monitoring residential mortgage lending practices to ensure sound underwriting and risk management.
- Assessing wholesale credit exposures to identify vulnerabilities in large credit transactions and market participants.
- Enhancing liquidity risk management frameworks to ensure institutions can meet their financial obligations during stress scenarios.
Regulatory Priorities:
- Implementing robust supervisory strategies for federally regulated financial institutions (FRFIs) and pension plans.
- Fostering resilience and stability in the financial sector through proactive regulation and oversight.
- Addressing emerging risks and adapting regulatory approaches to evolving financial landscapes.
For more details, you can read the full report here.