Canada’s banking regulator is not pushing for higher capital levels at the banks, the head of the Office of the Superintendent of Financial Institutions said Thursday.

Speaking to an investor conference in Toronto, Julie Dickson, the Superintendent of Financial institution, said that “the Canadian banking system remains very well capitalized and there are no plans to increase the current [capital] targets set by OSFI.”

Boosting capital requirements in the current environment would amplify the economic downturn, she suggested.

“While markets have been driving capital levels up, it is important to keep in mind that capital cushions are meant to fall when needed,” Dickson added in her remarks to the RBC Capital Markets Canadian Bank CEO Conference.

Her speech ostensibly focused on the issue of pro-cyclicality — the risk that regulatory requirements may amplify the extremes of the credit cycle, or economic cycle — and whether there should be reforms to try and avoid this effect. Dickson argued that there are already a number of measures to dampen pro-cyclicality, but she allowed that “more thought is required.”

“Some proposals, like changes to [value-at-risk used to measure trading risk], are straightforward. Others, such as proposals to automatically increase capital requirements in periods of optimism and euphoria, are good ideas but extremely difficult to implement,” she cautioned, adding, “All such proposals however deserve full consideration.”

In addition, Dickson noted that current economic situation will challenge all financial institutions. “Canadian banks have handled the first wave — financial market turmoil — relatively well,” she said. “The second wave — a serious economic downturn — will hit both capital and profits, but the Canadian banking system is probably better positioned than most other systems to deal with the second wave.”