Canada’s OSFI Developing AI ‘Safety Code’ to Tighten Guardrails on Banks
The Office of the Superintendent of Financial Institutions is creating a safety code to establish stricter artificial intelligence guidelines for Canadian banks, citing rising cyber risks from powerful AI models and autonomous agents.
Canada’s financial regulator is moving to implement tighter guidelines on artificial intelligence for the country’s banks. The Office of the Superintendent of Financial Institutions (OSFI) is developing a “safety code” designed to improve cybersecurity and mitigate AI-related risks across the banking sector.
OSFI Superintendent Peter Routledge tasked his team with creating the new standards after the emergence of powerful AI models and autonomous agents heightened concerns about cyber threats. Routledge specifically cited Anthropic’s Claude Mythos model, which can find and exploit software weak spots, as a catalyst for considering firmer guardrails.
Previously, OSFI guided banks to “do no harm” rather than implementing a strict regulatory framework. The shift toward a specific safety code represents a move to balance safety with innovation. In 2023, OSFI and the Global Risk Institute published a report examining the implications of AI on financial services institutions.
Canadian banks are already significant adopters of the technology. AI benchmarking platform Evident ranked all five of Canada’s biggest banks in the top 30 of a list of 50 global financial institutions based on AI adoption. However, Routledge stated that not all institutions are equal in their AI preparedness, warning that issues at one institution could spread through the banking system via counterparties.
Beyond artificial intelligence, OSFI will highlight private credit and private equity as mounting risks in its upcoming risk outlook. The regulator is also addressing capital requirements. In June, OSFI lowered the size of the capital cushion required for the country’s biggest banks, freeing up billions of dollars for lending. Over the next six months, OSFI will examine how its capital framework may disadvantage small- and medium-sized lenders compared to larger banks.
Routledge also addressed political claims regarding foreign access to the Canadian market. He refuted U.S. President Donald Trump’s claim that U.S. banks cannot operate in Canada, stating that recent mid-sized bank acquisitions were made by Canadian buyers due to a lack of foreign bids rather than geographic bias.
Meanwhile, Federal Natural Resources Minister Tim Hodgson urged financial institutions to help finance Ottawa’s nation-building projects.