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Regulator raising big banks’ capital buffer as COVID-19 disruptions ease

Click to play video: 'Many Canadian banks hiking customer fees while seeing major profits' Many Canadian banks hiking customer fees while seeing major profits
The first three months of this year have been an earning bonanza for Canadian banks. The big driver of profit? They haven’t had to set aside as much money as a cushion against bad loans. Most of them hiked up fees or increased minimum monthly balances on certain types of accounts or are about to. Global’s Anne Gaviola reports – Jun 2, 2021

The federal banking regulator says it will increase the domestic stability buffer for the country’s big banks to 2.5 per cent from one per cent as economic and market disruptions stemming from the pandemic have subsided.

The change, which increases the amount of capital the banks must hold to cover unexpected losses, will take effect on Oct. 31.

The Office of the Superintendent of Financial Institutions cut the buffer to one per cent in March last year in anticipation of the economic disruption due to the pandemic.

Read more: Canada’s big banks are seeing their profits soar. Here’s how they’re making their money

It says the lower level gave Canada’s big banks the ability to absorb potential losses and continue to make loans.

The regulator says 2.5 per cent is prudent given the current environment, where key vulnerabilities such as household and corporate debt levels remain elevated.

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The domestic stability buffer only applies to Canada’s six largest banks, which have been designated as systemically important.

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