The International Monetary Fund (IMF) Executive Board has concluded its 2025 Financial System Stability Assessment with Canada. The assessment, finalized on July 1, 2025, was based on the findings of IMF missions to Canada during October-November 2024 and February 2025. The process was completed without formal discussions by the Executive Board.
Canada’s financial system is described as large and highly developed. Six major banks control 94 percent of total banking assets in the country, while nonbank financial institutions such as mutual funds, pension funds, and insurance companies also play a significant role. The assessment took place amid slow economic growth, ongoing trade policy uncertainty, and increased geopolitical risks.
According to the IMF’s analysis, “Canada’s financial system is strong and well-regulated and has demonstrated resilience in recent years.” Stress testing results show that both banks and nonbank financial institutions are generally able to withstand severe shocks affecting solvency and liquidity. However, their considerable exposure to residential real estate continues to require careful monitoring because of potential risks linked to debt serviceability and high household debt levels. For large banks, commercial real estate risk appears manageable; however, this remains a notable concern for pension funds and insurers. The interconnectedness of Canada’s financial sector with global markets may amplify these risks if geoeconomic fragmentation or trade issues intensify.
The IMF found that oversight frameworks in Canada are robust but could be further improved to address new challenges proactively. It highlighted the importance of enhanced cooperation between federal and provincial authorities for effective risk monitoring across all types of financial institutions—particularly nonbanks—and recommended better data collection and stress testing for NBFIs.
The report noted: “While financial sector oversight and crisis management frameworks are robust, they could be further strengthened to proactively address emerging challenges. Enhancing cooperation and information sharing between federal and provincial authorities is essential to effectively monitor risks across the financial sector, particularly concerning NBFIs. Also, there is scope to strengthen data collection and stress testing practices for NBFIs.”
It added: “Supervisory authorities follow a sound risk-based approach focused on key priorities. However, further clarification of their mandates, enhanced budgetary autonomy and strengthened resources would support more effective oversight.”
Canadian authorities have made progress in areas such as cyber resilience and climate risk analysis; continued work in these fields is encouraged by the IMF. The assessment also points out that improving Anti-Money Laundering/Combating the Financing of Terrorism supervision remains an important priority for Canadian regulators.
“The authorities have made notable progress in bolstering cyber resilience and advancing climate risk analysis, and are encouraged to continue building on these achievements,” stated the IMF report. “Enhancing Anti-Money Laundering/ Combating the Financing of Terrorism (AML/CFT) supervision and enforcement remains a priority, and the authorities’ commitment to reviewing the AML/CFT sanctioning regime is welcome.”
Finally, harmonizing deposit insurance schemes across jurisdictions was identified as beneficial by the IMF team. Strengthening resolution frameworks for insurers was also recommended.
The Financial Sector Assessment Program (FSAP), started in 1999 by the IMF, provides comprehensive reviews of countries' financial sectors focusing on stability issues. FSAPs are required for jurisdictions with systemically important financial sectors like Canada.