Global Influences on Canada's Financial Regulatory System
Two major international publications released this summer — the International Monetary Fund's (IMF)Financial System Stability Assessment for Canada and the Financial Stability Board (FSB) Chair's priorities letter to G20 Finance Ministers — offer important insights into the global financial landscape and its implications for Canadian financial regulation. These reports highlight areas where Canadian regulators may adapt or enhance their frameworks in the coming years to maintain resilience and competitiveness for the Canadian financial sector.
IMF Assessment: Strengths and Potential Regulatory Implications
The IMF published its Financial System Stability Assessment report for Canada on August 1, 2025. The report is based on the work of the IMF Financial Stability Assessment Program (FSAP) missions to Canada during October-November 2024 and February 2025.
It reaffirms Canada's position as a systemically important financial jurisdiction, with two globally systemic financial institutions and internationally active insurance, pension, and investment fund sectors. The IMF commends Canada's "robust" oversight framework and the resilience of its financial system during the pandemic and its aftermath. However, it also identifies several areas to further strengthen Canada's financial system, which could shape federal and provincial regulatory priorities in the coming years.
Enhanced Monitoring and Data Reporting
- In light of current risks, supervisors are urged to intensify monitoring of mortgage refinancing risks and household/corporate liquidity buffers.
- Expanded data coverage and reporting is recommended for real estate-secured lending and all large pension plans.
- The IMF notes that stress testing practices could be strengthened across sectors.
Continued Climate and Cyber Risk Management
- Regulators are encouraged to collaborate with climate experts to standardize climate risk data and strengthen data sharing and frameworks across provinces.
- Supervisory powers over third-party technology vendors should be expanded, alongside new protocols recommended for managing systemic cyber incidents.
Capital Buffer Reforms
- Provincial policymakers are encouraged to apply the Domestic Stability Buffer to all domestically important deposit-taking institutions (DTIs).
- The IMF encourages a counter-cyclical capital buffer be established for all other DTIs at both federal and provincial levels.
Deeper Supervision and Anti-Money Laundering (AML) Enforcement
- The Office of the Superintendent of Financial Institutions (OSFI) is encouraged to "increase bank supervision intrusiveness" through more frequent and deeper reviews.
- The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is also encouraged to intensify AML supervision, increase compliance reviews, and strengthen its sanctioning regime to deter noncompliance.
Related Party Restrictions
- Regulators are urged to align related-party and affiliate restrictions more closely with international standards.
Deposit Insurance Harmonization
- The IMF calls for harmonization of federal and provincial deposit insurance schemes and updates to coverage limits.
Insurance Sector Supervision and Resolution Planning
- OSFI and the AMF are encouraged to implement consolidated supervision for insurance groups and develop a resolution framework for insurers.
- There are noted limitations on the ability of industry-funded protection schemes to effectively assist in crisis preparedness. The IMF suggests the Winding-Up and Restructuring Act (WURA) is outdated and requires comprehensive reform.
FSB Priorities: Global Trends with Local Relevance
In his July 2025 letter to the G20 Finance Ministers, the new FSB Chair outlined several strategic priorities against the backdrop of heightened global market volatility and uncertainty. These priorities resonate with several themes in the IMF report and offer additional context for Canadian regulators.
Enhancing Surveillance Capabilities
The FSB plans to emphasize the need for adaptive surveillance tools and improved data reporting to monitor vulnerabilities, particularly considering evolving non-bank systems and emerging technologies.
Focus on Systemic Key Risks
Key areas of concern include non-bank financial intermediaries, leverage, climate-related financial risks, the growing role of private finance, and the impact of stablecoins being used for payment and settlement purposes.
Cross-Border Payment Efficiency
The FSB will continue to promote better cross-border payment services, warning that inefficiencies in international payments could exacerbate fragmentation in the global financial system, and underscoring the importance of harmonized standards and infrastructure.
Concluding Thoughts
The IMF and FSB publications suggest a variety of options to continue to strengthen Canada's regulatory framework. Some of the recommendations are at odds with the general view of many regulated entities that there is already too much regulatory burden, despite the benefits of financial stability emphasized by the IMF and FSB. For policy makers and regulators, the challenge will be to balance domestic priorities with these global standards, ensuring that Canada's financial system remains resilient, competitive, and aligned with international best practices.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
