Banking Regulatory Year in Review and 2026 Outlook

This bulletin summarizes key regulatory developments impacting the Banking sector in 2025 and looks ahead to 2026. Overall, there was a slowdown in the pace of new regulatory initiatives compared to recent years, as regulators pivoted to respond to a global economy undergoing constant shifts.

Key Developments in Banking Regulation

Navigating Ongoing Economic Uncertainty

The Canadian economy experienced continued uncertainty in 2025, as the United States reshaped global trading relationships, a federal election paused policy development and conflicts continued in several regions. In response to the related financial risks, there were several major changes from the federal government and OSFI in 2025:

• In order to support Canadian banks’ global competitiveness and resiliency in uncertain markets, in February OSFI paused changes designed to align with the Basel III standardized capital floor level. More details on this can be found in our bulletin Financial Services Update: OSFI Guidelines and Payments Canada Consultation.
• The federal Budget proposed to ‘unlock’ over $500 billion in private investment over the next five years, as the government aims to advance multiple ‘nation building’ projects. While it remains to be seen to what extent this will shift the regulatory framework around commercial lending and equity financing, there are some changes proposed to OSFI’s Capital Adequacy Requirements (CAR) Guideline, detailed in our November bulletin, OSFI Quarterly Release: Capital Changes and Other Updates. The related consultation closes February 18, 2026.
• The federal Budget announced the creation of a new federal housing agency, Build Canada Homes, to attract investors and builders to expand the housing supply. The Budget also proposed to increase the Canada Mortgage Bond annual issuance limit from $60 billion to $80 billion to help lenders finance multi-unit home builds.Bill C-15 is currently going through Parliament.
• Looking ahead, OSFI has announced it will consult on proposed changes for Guideline B-12: Interest Rate Risk and the Credit Risk Management Guideline, expected as part of its next quarterly release on January 29, 2026. The next OSFI announcement on the Domestic Stability Buffer rate for Canada’s largest banks is expected on December 18, 2025.

Enhancing Financial System Competition

The federal and provincial governments and regulators announced several initiatives to support resiliency, growth and new entrants: 

• The federal Budget announced several measures to support new or smaller institutions, including adjusting the public holding threshold from $2 billion to $4 billion, and efforts to improve access to brokered deposits. More details are available in our bulletin 2025 Federal Budget: Highlights Affecting Financial Services.
• The related Bill C-15 also proposes several amendments to the Bank Act and related legislation to make it easier for credit unions to enter the federal framework, including by allowing them to continue their existing auto leasing business, and to support federal credit unions’ growth through amalgamations or asset acquisitions.
• The Ontario government amended the Credit Unions and Caisse Populaires Act, 2020 to allow its credit unions to raise capital beyond their membership base by offering shares to non-members.These changes came into effect on November 27, 2025.
• In July, Finance Canada issued a detailed consultationon possible changes to the CDIC deposit insurance framework, potentially expanding coverage on eligible deposits;
• Looking forward, the federal Budget also noted that the government has concluded negotiations and has reached an agreement in principle with provinces and territories on a Financial Services chapter for the Canada Free Trade Agreement.

Supervisory Approach

While the pace of new initiatives at the federal level has slowed, OSFI remains focussed on non-financial risks, with implementation dates for guidance in this area continuing to come into force, particularly for the Integrity and Security Guideline and Guideline E-21: Operational Risk Management and Resilience.

• OSFI completed a review of its Supervisory Framework, which was effective as of April 1, 2024. As detailed in our November bulletin, OSFI Quarterly Release: Capital Changes and Other Updates, the new framework supports earlier OSFI intervention and FI risk management. OSFI plans several changes in 2026, particularly to address the ‘weakest link’ rating implications for its updated Overall Risk Rating (ORR).
• The federal Budget proposed a national anti-fraud strategy targeted at stronger protections for consumers, and announced a new Financial Crimes Agency that will take the lead on complex financial crimes by Spring 2026.
• OSFI issued key changes to its administrative monetary penalties (AMPs) framework, as summarized in our bulletin, OSFI Quarterly Release: Updates Issued for Capital Adequacy, Model Risk Management and Insurer Peer Review. The revised approach is effective for violations that occur after September 11, 2025.

Supporting Digital Innovation and Mitigating its Risks

The digital transformation of banking services continued in 2025, leading to several announcements from the federal government and OSFI to drive innovation and address the related risks:

• In February, OSFI issued its final guideline on its approach to the capital and liquidity treatments of crypto-asset exposures, which came into effect in November 2025 or come into effect January 2026, for FRFIs with a fiscal year end of October 31 or December 31, respectively. More details on The Capital and Liquidity Treatment of Crypto-asset Exposures (Banking) Guideline, and its related guidelines for banks concerning public disclosure of their exposures to crypto assets, are available in our bulletin, Financial Services Update: OSFI Guidelines and Payments Canada Consultation.
• The scope of OSFI’s Guideline E-23: Model Risk Management was expanded in September to capture risks from artificial intelligence and machine learning, as explained in our bulletin, OSFI Quarterly Release: Updates Issued for Capital Adequacy, Model Risk Management and Insurer Peer Review. When it comes into effect on May 1, 2027, the updated guideline will apply to all FRFIs, including insurance companies and foreign bank branches.
• The Retail Payment Activities Act came into force in September 2025. Payment service providers are required to register with the Bank of Canada and ‘safeguard’ their end-user funds, by depositing the funds in trust accounts with Canadian financial institutions or through similar options. More details are included in our bulletin, Payment Services Providers - Preparing to Comply with Safeguarding of Funds Requirements.
• In November, OSFI issued a Technology and Cyber risk management Self-assessment Tool, to align with its Guideline B-13: Technology and Cyber Risk Management.
• The federal Budget proposed new legislation to regulate the issuance of stablecoins, commonly tied to fiat currencies. It will require issuers to maintain and manage adequate asset reserves, establish redemption policies, and implement risk management frameworks. Amendments are proposed to the Retail Payment Activities Act to establish the Bank of Canada’s oversight mandate.
• The federal Budget also confirmed the government’s intent to advance open banking by introducing legislation to complete the Consumer-Driven Banking Act. It shifted oversight from FCAC to the Bank of Canada, aligning with the Bank’s oversight of payment service providers. Additional legislation is targeted for mid-2027 and was tied in the Budget to Payments Canada’s completion of the Real-Time Rail project in 2026 and its widespread use.

Looking Ahead

In navigating the current risk environment, governments and regulators continue to prioritize areas that support financial institutions’ resiliency. OSFI has telegraphed that it will focus in 2026 on credit risk, liquidity risk and the corporate governance and controls over operational and technology risks, while deprioritising areas that pose less immediate risk to systemic stability.