IMF Executive Board Concludes 2025 Financial System Stability Assessment with Canada

IMF News, August 1, 2025

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The Executive Board concluded the Financial Sector Assessment Program (FSAP) with Canada on July 18, 2025 without convening formal discussions under the lapse-of-time procedure.
The Financial System Stability Assessment (FSSA) report was completed on July 1, 2025.
The FSSA is based on IMF FSAP missions to Canada during October-November 2024 and February 2025.
Context: the FSAP was conducted amid slowing economic growth, trade policy uncertainty, and heightened geopolitical risks.

Canada has a large and highly developed financial system.
The banking system is concentrated with six systemically important banks accounting for 94 percent of total banking assets.
Nonbank financial institutions (NBFIs) are important and include mutual and pension funds and insurance firms.
The interconnectedness of the Canadian financial sector with global markets amplifies risks from geoeconomic fragmentation and mounting trade risks.

Canada’s financial system is strong and well-regulated and has demonstrated resilience in recent years.
Stress tests indicate that banks and NBFIs are generally resilient to severe solvency and liquidity shocks.
Residential real estate exposure is substantial and warrants close monitoring because of risks related to debt serviceability and high household debt.
Commercial real estate risks:
- Appear manageable for large banks.
- Remain significant for pension funds and insurers.
Intensifying geoeconomic fragmentation and mounting trade risks could weigh on economic growth, unemployment, and real estate valuations.

Financial sector oversight and crisis management frameworks are robust but could be further strengthened to proactively address emerging challenges.
Supervisory authorities follow a sound risk-based approach focused on key priorities.
Gaps and areas for strengthening:
- Further clarification of supervisory mandates.
- Enhanced budgetary autonomy and strengthened resources for supervisors.
- Enhanced cooperation and information sharing between federal and provincial authorities to effectively monitor risks across the financial sector, particularly concerning NBFIs.
- Scope to strengthen data collection and stress testing practices for NBFIs.
- Enhancing AML/CFT supervision and enforcement remains a priority; the authorities’ commitment to reviewing the AML/CFT sanctioning regime is welcome.
- Greater harmonization of deposit insurance schemes across jurisdictions would be beneficial.
- Further strengthening of the resolution framework for insurers is encouraged.
Positive progress noted:
- Notable progress in bolstering cyber resilience.
- Advances in climate risk analysis; authorities are encouraged to continue building on these achievements.

The Financial Sector Assessment Program (FSAP), established in 1999, is a comprehensive and in-depth assessment of a country’s financial sector.
FSAPs provide input for Article IV consultations and thus enhance Fund surveillance.
FSAPs are mandatory for the 47 jurisdictions with systemically important financial sectors and otherwise conducted upon request from member countries.
The key findings of an FSAP are summarized in a Financial System Stability Assessment (FSSA).

International Monetary Fund — Press Release No. 25/270, August 1, 2025.