Julie Dickson, head of the Office of Superintendent for Financial Institutions, will finish her term on July 4, 2014.
She took over the job in July 2007, just ahead of the global financial crisis that plunged Canada into a deep recession.
Dickson, who has been widely praised for her no-nonsense approach to bank business practices, had been deputy superintendent and acting superintendent before taking over the top job at the financial regulator.
In a speech Tuesday, Dickson noted OSFI must always be alert to what can go wrong.
As such, she says OSFI has insisted Canada's financial institutions meet new global regulations under Basel III six years in advance of the 2019 deadline and also imposed a surcharge on the six biggest banks effective 2016.
Although Canada's banks have been assessed as among the world's soundest, "the current global economic environment is not comforting," she explained.
"When in unchartered waters, you do not want to test whether the boat is sound enough. We need to be prepared in the event of serious downside risks materializing."
She also continues to closely monitor Canada's housing market, and growth in household debt, both legacies of the sustained period of low interest rates, which have been in place since late 2008.
Although, the real estate market has recently begun to cool, "one has to always pay attention," she said.
Dickson said a major challenge facing Canada now is the coming transition from super-low to more normal interest rates, which she said can be painful.
Low rates are an incentive for borrowers to go into debt, banks to take risks and businesses to become dependent on credit, she explained.
"Sustained low interest rates are a major area of focus for OSFI ... dependence on low interest rates can become significant, meaning that transition to higher rates could be very painful," she told a business audience in Toronto.
"This environment can provide incentives for banks to grow their earnings asset base by trying to gain market share (a zero sum game), increase fee income activities, reduce expenses, enter new markets, and by increasing the proportion of higher-yielding assets (both in the lending and investment portfolios). Of more concern, products and businesses that are over-reliant on low financing costs tend to grow and borrowers are strongly incented to increase leverage."
Most observers believe OSFI will need to monitor the impact of low interest rates for some years to come.
Although the Bank of Canada maintains an official tightening bias, the consensus among economists is that it won't actually start raising borrowing costs until late 2014 or sometime in 2015.