Liquidity and funding risk is among the three key risks for Canada’s financial institutions, according the Office of the Superintendent of Financial Institutions’ 2026-2027 Annual Risk Outlook.
Geopolitical events have spurred dynamic shifts in investor sentiment, driving volatility in global markets. Such events have also hindered Canada’s economy; thus, the risk environment has been defined by muted growth and a softened labour market, especially where trade dynamics hit hardest.
The report noted that global uncertainty could dampen confidence in funding markets; while funding cost and availability are stable, the likelihood of accelerated liquidity events is a significant concern.
The report also flagged real estate secured lending and non-bank financial institution risks as major risks. With housing and mortgage pressures rising in parts of Canada, non-traditional banking risks have increased where non-bank lenders and investment funds are shouldering heightened borrowing.
Toronto and Vancouver in particular have been affected by economic pressures like trade uncertainty, commodity price volatility, employment risks, and weak consumer confidence – factors that have caused home listings to increase while sales and prices dropped. Sales in the condo segment in these cities dropped to the lowest they have been since the 1990s.
Nonetheless, the OSFI said it did not expect RESL-related losses to significantly affect capital levels at most lenders given current allowances and robust earnings.
Other significant risks include commercial real estate, wholesale credit, integrity and security, cyber, technology, third-party, and artificial intelligence. The OSFI reported that its mitigation efforts combined with that of institutions has limited the possible effect of integrity and security risks.
The OSFI indicated that it would prioritize risks in the housing market and was regularly tracking residential mortgage lending risks via advanced analytics and close supervision of financial institutions. It was also monitoring mortgage lenders’ compliance with mortgage underwriting, account and portfolio management expectations set out in Guideline B-20 – Residential Mortgage Underwriting Practices and Procedures.
The OSFI cited the review of banks’ actions to tackle de-staging conditions (as applicable) among its 2026-2027 priorities. It is developing a credit risk management guideline to improve credit risk management by institutions; the organization has opened the window for feedback until July 29.