Canada's financial regulator maintains biggest banks' domestic stability buffer, says they are resilient

TORONTO, Dec 18 (Reuters) - Canada's financial regulator on Thursday said it was maintaining the amount of additional capital the country's largest lenders must hold, saying the big six banks are resilient in a changing risk environment.

The Office of the Superintendent of Financial Institutions (OSFI), which oversees the banks to ensure financial stability, maintained the domestic stability buffer (DSB) at 3.5%. It added that the six biggest banks maintain Common Equity Tier 1 (CET1) ratios at an average of 13.6%, well above the requirement of 11.5%. This capital cushion equates to roughly C$60 billion ($43.56 billion), OSFI said.

"This enables them to provide core banking services to the Canadian economy throughout the business cycle," Superintendent of Financial Institutions Peter Routledge said in a statement.

The DSB is additional capital the big six banks must set aside to cover losses during financial uncertainties to ensure stability of those institutions that have a major impact on Canada's economy.

OSFI said major vulnerabilities in the banking system remain elevated but stable, including Canadian household debt. Canadian corporate debt growth has moderated, but credit quality is vulnerable to trade-related challenges, it said.

Global uncertainty and geopolitical risks continue to shape the risk environment, OSFI said, adding that it does not expect to increase the DSB from its current level, as systemic vulnerabilities are stable.

A lower buffer allows the banks to increase lending activity, putting money flow back into the Canadian economy, an option on the table for OSFI if vulnerabilities materialize.

($1 = 1.3774 Canadian dollars)