Structured Finance Canada – 2025 Year in Review
Introduction
In 2025, the Canadian structured finance and securitization market demonstrated resilience amid ongoing global economic uncertainty. Consumer assets, including credit card receivables, new and used auto loans and leases, residential mortgages, and home equity lines of credit, continued to account for the majority of Canadian securitization activity. Investor appetite remained strong, supported by stable credit performance and low default rates. Overall, the sector maintained its reputation for transparency and robust risk management.
Our Firm’s industry-leading national structured finance practice played a central role in many notable Canadian transactions throughout the year. As we reflect on a dynamic period, the following is a review of Canadian structured finance activity in 2025, together with key legal and regulatory developments of interest.
Market Activity and Trends
We advised on a growing number of issuances backed by specialized assets, including revenues from data centres, telecommunications infrastructure, and fibre-optic networks within the broader digital infrastructure sector, as well as other emerging asset classes. This trend reflects a growing appetite for diversification among investors. Economic and geopolitical uncertainty during the first and second quarters of 2025 caused some hesitation for issuers of market-facing transactions, but private activity remained robust throughout the year. In response to evolving economic conditions and tariff-related uncertainty, market participants adopted innovative transaction structures, enhanced risk management practices, and pursued cross-border transactions and strategic risk-transfer programs.
Increased Diligence
There have been a few insolvencies of originators in the North American securitization industry in recent years. While each case arose from unique circumstances, there is generally a heightened sensitivity around risk management practices and a renewed focus on the fundamentals that have always been relevant to securitization structures. Transaction parties are in particular requesting more robust legal and commercial diligence in response to emerging and ongoing case law concerning priority disputes involving assets financed across multiple transactions.
Private Credit Securitizations
Private credit continued to play an increasingly prominent role in Canadian securitization activity, as non-bank lenders capitalize on opportunities to provide financing. Private credit funds participated in both traditional and alternative asset-backed transactions, offering flexible structures tailored to borrower needs. While this trend has contributed to greater market diversification, it has also prompted increased focus on risk management, disclosure, and transparency.
Digital Infrastructure Securitizations
Canadian digital infrastructure structured finance and securitization activity was characterized by strong investor demand, multi-billion dollar M&A and refinancing transactions, and significant capital inflows from REITs and infrastructure funds. Power constraints and rapidly growing AI-driven demand are prompting data centre developers to adopt innovative financing structures, while evolving yields and capitalization rates reflect a maturing asset class. Our Firm has acted as a key legal advisor on several landmark domestic and cross-border transactions in this space. Looking ahead, sustained demand for scalable digital infrastructure is expected to support continued transaction activity, notwithstanding challenges related to power availability. The sector’s ongoing expansion and complexity are driving increasingly sophisticated dealmaking across Canada’s major markets.
SASB/CMBS for Bespoke Properties
In 2025, the Canadian commercial mortgage-backed securities (“CMBS”) market experienced a shift toward single-asset, single-borrower (“SASB”) structures. These transactions allow issuers and investors to tailor terms to the specific characteristics of a single property or a concentrated portfolio—such as a specialized industrial asset—providing greater flexibility in covenant design, cash flow mechanics, and risk allocation than traditional conduit CMBS structures that pool numerous loans.
Although the Canadian CMBS market remains relatively small, it forms part of a broader securitization ecosystem that includes covered bonds and residential mortgage-backed securities (“RMBS”), with residential mortgages and consumer-related receivables continuing to account for the majority of new issuances in Canada. Recent Canadian SASB transactions have adopted US-style SASB platforms to the Canadian legal and regulatory framework, establishing a template for future Canadian-dollar SASB issuances.
Market participants are closely monitoring these developments, and we have observed growing demand for customized financing solutions and alternative funding channels, particularly in response to refinancing pressures and asset-specific risk considerations. Our Firm’s Structured Finance Group has played a leading role in these landmark CMBS transactions.
Residential Mortgage Funding Trends
Recent trends indicate a continued increase in the funding of uninsured residential mortgages through covered bonds, RMBS, and asset-backed commercial paper programs. Residential mortgage loans remain the dominant asset class in Canadian securitization markets, reflecting strong demand for alternative funding channels beyond traditional bank financing. While securitized asset pools continue to be diversified, residential mortgages remain central to new issuances, with market participants leveraging structured finance techniques to access liquidity, optimize balance sheets, and manage risk more efficiently.
Canadian financial institutions also maintained active covered bond programs throughout 2025, although at more moderate issuance levels relative to the 2023–2024 peak period. The Canada Mortgage and Housing Corporation (“CMHC”) Covered Bonds Business Supplement (Q3 2025) reported C$28 billion of issuance in 2025 and C$282 billion outstanding under the legislative framework.[1] Our Firm’s Structured Finance Group is widely recognized as the market leader on global offerings by Canadian covered bond issuers.
Legal and Regulatory Developments
Criminal Code – Criminal Rate of Interest (Section 347)
On January 1, 2025, amendments to the Criminal Code (Canada) provisions governing the criminal rate of interest came into force, following enactment under the Canadian Budget Implementation Acts of 2023 and 2024. The criminal rate was reduced to a 35 percent annual percentage rate from a 60 percent effective annual rate, subject to exceptions for certain commercial loans, pawnbroker loans, and payday loans. The offence was also expanded to include the offering or advertising of credit at an interest rate exceeding the criminal rate, enabling enforcement action without evidence of a completed loan.
For more information, see our Firm’s article on these amendments. Our Financial Institutions Regulatory Group continues to actively monitor developments in this area and can advise on the impact of these changes to your business.
FINTRAC Modernization (2025)
Canada’s anti-money laundering and anti-terrorist financing regime was modernized in 2025. Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) has introduced enhanced compliance obligations for a broader range of entities, including factors, cheque-cashing businesses, and financing and leasing companies. Key changes include the introduction of private-to-private information sharing between reporting entities (subject to privacy safeguards and an approved code of practice) and new requirements to report material discrepancies in beneficial ownership information to a federal registry. FINTRAC is supporting implementation through updated guidance, outreach initiatives, and enhanced reporting tools.
CMHC’s New Guide – Effective January 1, 2026
On July 31, 2025, CMHC released an updated Canadian Registered Covered Bond Programs Guide, representing the first significant revision since 2017. The revised Guide, effective January 1, 2026, introduces targeted enhancements designed to strengthen program resilience and modernize disclosure standards.
Key changes include an increase in the minimum regulatory overcollateralization requirement to 105 percent and a more formalized framework for extendable (soft-bullet) maturities, including limits on extension periods and enhanced notice and interest-accrual mechanics. Monthly reporting requirements have also been expanded to provide greater transparency regarding cash flows, loan characteristics, and risk exposures.
The updated Guide further clarifies asset-eligibility criteria, confirming that home equity lines of credit (“HELOCs”), whether standalone or embedded in collateral mortgages, are not eligible assets, and that only the amortizing portion of collateral mortgages may be included. CMHC has also formalized expectations regarding liquidity support through reserve funds triggered by specified ratings events.
For existing issuers, these changes require updates to program documentation and reporting processes. Institutions considering future programs may find that the revised framework provides clearer parameters around eligibility, liquidity, and disclosure when evaluating covered bonds within broader funding strategies.
Practical Takeaways and Looking Ahead
Despite a shifting regulatory and macroeconomic environment, the Canadian structured finance and securitization market remained resilient across a broad range of asset classes in 2025.
With North American economic growth expected to remain steady but moderate, structured finance activity is generally expected to remain robust in 2026. Lower interest rates should support consumer ABS issuance, while declining short-term rates are expected to strengthen collateralized loan obligation performance. Commercial real estate borrowers may benefit from improved refinancing conditions. Elevated geopolitical uncertainty may further encourage banks and other entities to re-allocate risk, supporting demand for collateralized funding structures and increasing securitization issuances. In addition, the continued expansion of private credit and sustained demand for artificial intelligence and cloud computing infrastructure should increase structured finance issuances across several ABS sectors.
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