Canadian Banking Regulator Proposes Easier Lending Rules for Banks to Boost Economy and Competition
By Naimul Karim, Financial Post — November 20, 2025
Canada’s top banking regulator, OSFI, now suggests softer lending rules. OSFI wants to free bank capital. This change aims to boost lending and investments. It helps the economy grow in a fast-changing financial world.
Proposed Changes to Risk Weights
OSFI has new plans. The bank must now check loan risks in a different way. OSFI will lower risk weights for loans to small and medium businesses. The weight drops from 85% to 75%. Regulators use risk weights to mark how likely a loan is to default. A high risk weight forces banks to hold more capital. Lower weights mean banks can use capital for lending and other tasks.
OSFI also sees lower risk in low-rise residential projects. It plans to drop their base risk weight from 150% to 130%. For loans that meet at least 75% pre-sales, risk weights drop further. This step gives a boost to real estate loans while keeping risks in check.
Economic and Competitive Rationale
Jacqueline Friedland, OSFI’s executive director, keeps risks managed and banks flexible. She said these precise changes open more capital for loans and investments. At the same time, the government pushes for more competition in Canada’s finance market. Recent budgets now support smaller, alternative banks. Ottawa cuts fees and makes switching chequing accounts easier. These steps could change Canada’s banking scene for the better.
OSFI also starts a 90-day public check. This period lets banks and the public share ideas. The goal is to ease lending rules without adding extra risk.
Banks Have Room to Lend More
OSFI Superintendent Peter Routledge said banks now hold strong capital reserves. He claimed banks might lend nearly $1 trillion more. This amount is large when compared with Canada’s roughly $3-trillion economy. Routledge noted that these buffers should not sit idle. He said banks should use them to fuel growth. More lending to businesses and customers can help during trade disputes and other challenges.
Next Steps
Industry experts and the public can now review the new ideas. Their feedback will help OSFI shape the final rules. Draft regulations may come by spring 2026. Banks may soon have more room to support new business and consumer credit. This change can spark economic growth and make the banking scene more competitive.
For continued coverage on Canada’s banking regulations and economic developments, subscribe to Financial Post.
Full money-growing playbook here:
youtube.com/@the_money_grower