Finance Minister François-Philippe Champagne says the government wants to boost competition in banking sector, among other regulatory goals.Adrian Wyld/The Canadian Press
Finance Minister François-Philippe Champagne says the federal budget provides long-awaited regulatory certainty needed to bolster investment in financial services after years of delays to new regimes that would boost competition in Canada’s highly concentrated banking sector.
Prime Minister Mark Carney’s first federal budget issued the country’s most significant steps yet toward levelling the playing field for small lenders and fintech companies eager to take on the big six banks’ dominant market share.
At the same time, the budget lacked measures to ease previous tax hikes and reduce regulatory burden on Canada’s biggest banks.
“What you’re asking us and what we’re aiming to do is provide you certainty in terms of regulation, where we’re going, what we’re going to do, so that you can craft the products, think about the services, and make the investments needed,” Mr. Champagne said during an event Thursday at MaRS Discovery District in Toronto.
“Some people have been waiting for a long, long time to be provided certainty on open banking.”
Canada’s banking regulator has been caught between maintaining the stability of the financial system and loosening rules to allow new platforms and players into the system.
The implementation of an open-banking regime and real-time rail-payments infrastructure have faced several delays, and Canada has fallen far behind its peers.
Ottawa included several proposals in its federal budget aimed at boosting competition in financial services, including making it easier to switch financial institutions through an open-banking regime, a commitment to introduce legislation regulating stablecoins, and rule changes to make it easier for smaller banks and credit unions to expand their businesses.
“We also want smaller players to be able to increase their participation in the banking sector,” Mr. Champagne said.
Canada’s biggest banks – Royal Bank of Canada RY-T, Toronto-Dominion Bank TD-T, Bank of Nova Scotia BNS-T, Bank of Montreal BMO-T, Canadian Imperial Bank of Commerce CM-T and National Bank of Canada – combined hold more than 90 per cent of all bank assets.
In recent years, Ottawa imposed three new taxes specifically on banks and insurers to generate funds to support government initiatives and help pay off rising debt.
The banking industry denounced the measures as unfair targeting of financial institutions, detrimental to foreign investment and competition in the sector and restrictive to capital available to lend to consumers and businesses.
The Canadian Bankers Association placed this issue at the top of its list of budget recommendations, saying that industry taxes led to a…
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