Canada's OSFI Flags Mortgage and Credit Risks Amid Trade Uncertainty

Canada's banking regulator has flagged elevated credit risks facing lenders as a difficult trade environment weighs on economic growth and the labour market. In its annual risk outlook, the Office of the Superintendent of Financial Institutions said that a challenging trade backdrop continues to pressure borrower performance, heightening credit risks for banks, particularly in residential secured lending, corporate exposures to non-bank financial institutions, and commercial real estate. To guard against a build-up of high household leverage in mortgage portfolios, the regulator confirmed that its loan-to-income limit framework, which caps how much banks can lend relative to borrowers' incomes, would continue after meeting its prudential objectives. The regulator said it would keep conducting supervisory reviews of lenders with significant residential mortgage exposures to assess the adequacy of their controls and risk management, and urged proactive practices such as early intervention with borrowers vulnerable to payment shock at renewal and ensuring collateral valuations reflect current market prices. The outlook underscores how global trade tensions and elevated borrowing costs are filtering through to Canadian households and the financial system, keeping mortgage and credit quality a central supervisory focus.