The Globe and Mail reports in its Thursday edition that Canada's banking regulator will require large banks to hold more capital to guard against looming risks to the economy, including high levels of household and corporate debt. The Globe's James Bradshaw writes that the Office of the Superintendent of Financial Institutions (OSFI) said on Wednesday it is raising the "domestic stability buffer," an added cushion that Canada's six largest banks are required to build into their core capital reserves to help them cope in an economic downturn. Starting April 30, 2019, the buffer will rise to 1.75 per cent of a bank's risk-weighted assets, up from 1.5 per cent. The existence of the buffer was disclosed for the first time earlier this year. In a letter to banks outlining the change, OSFI highlighted "systemic vulnerabilities" that it tracks closely, including high household debt relative to incomes, uncertainty about housing markets and high corporate debt. "In our view, the main issue with OSFI's announcement is one of signalling," said Gabriel Dechaine, an analyst at National Bank Financial. Royal Bank of Canada told The Globe in a statement that the bank's capital-management practices are "unchanged."
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