Frontier AI and trade strain lift cyber and fraud risks for the lenders brokers rely on
Canada’s federal banking regulator says the risks facing lenders have multiplied since spring, and frontier artificial intelligence is the threat moving fastest.
The Office of the Superintendent of Financial Institutions (OSFI) released its 2026 Semi-Annual Risk Outlook on Thursday, finding that geopolitical uncertainty, a softer economy, and rapid technological change have intensified risk across Canada’s financial system since April.
Federally regulated financial institutions remain resilient and profitable, OSFI said, but face a more complex operating environment.
Frontier AI – the most advanced models currently available – sits at the centre of that assessment. The time between discovering a vulnerability and exploiting it has shortened, the regulator said.
“Frontier AI models can locate and exploit more vulnerabilities, enabling adversaries to launch coordinated, large-scale attacks across systems, applications, and third-party ecosystems,” the report said.
OSFI also flagged that a handful of providers, many based outside Canada, dominate frontier AI and cloud infrastructure, raising the risk of correlated outages.
“In an era of advancing AI capabilities, resilience is a competitive advantage,” said Peter Routledge, Superintendent of Financial Institutions.
“Financial institutions that harness AI responsibly while managing cyber, technology, and third-party risks will position themselves to thrive in a complex environment.”
What does OSFI’s AI warning mean for mortgage brokers?
The report lands weeks after MortgageFest Canada, where panellists warned that AI-forged identification and mortgage documents are slipping past brokers.
“AI is helping organised crime create synthetic IDs, which are passing by some of these identification providers. But AI is also helping stop fraud,” said Andy Kuyper, head of partnerships and secured lending at TransUnion.
“Fraud is a problem. It’s far easier for fraud to be committed when times are busy and everyone’s busy. So right now we’re in a good spot, but I would caution the industry to be careful as this industry rebounds – to be hypervigilant on fraud.”
Dalia Barsoum, founder of Streetwise Mortgages and co-founder of Wisely AI, echoed OSFI’s call for stronger governance.
“AI still needs human judgment. You cannot have AI run the show for you. What’s effective is to have it do certain things within boundaries, but oversee it, train it. And that’s where the human touch comes in.”
Lindsay Zwart, director, solutions – mortgage and housing at Equifax Canada, says today's brokers are navigating growing mortgage debt, rising delinquencies, changing borrower demographics, and increasing renewal activity across the market. https://t.co/5LW92wS2Md
— Canadian Mortgage Professional Magazine (@CMPmagazine) October 1, 2026
Trade war and geopolitics weigh on lenders
OSFI said GDP growth remains volatile, inflation is elevated and the Canada-US trade war continues to discourage investment and erode consumer confidence.
Inflation fears and the trade dispute have also been pushing bond yields and fixed mortgage rates higher this fall. The regulator noted that it cut the Domestic Stability Buffer in June to keep the big banks lending.
Speaking at the Global Risk Institute’s annual summit in Toronto on Wednesday, Routledge said the erosion of the rules-based international order worries him most.
“If you ask me what could get me in the back of the head that I don’t see coming, it would be something coming out of the shifting international order that harms an institution that OSFI is responsible for supervising,” he said.
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
