On August 26 2016 the Federal Department of Finance launched a review of the legislation governing banks, insurers and trust companies under federal jurisdiction by issuing an initial consultation paper. The initial paper sets out some key facts relating to the sector and comments on trends that are affecting and expected to continue to affect the sector. The paper concludes by inviting comment on certain high-level policy questions.

As most financial institutions are, at least in part, governed by federal legislation, the 2019 review could have wide-ranging implications for the sector. Comments on the questions set out in the paper are due by November 15 2016.

Key facts and noted trends

The paper describes the current economic environment in which the sector operates, which is marked by low interest rates and historically high levels of consumer debt. It also notes the high levels of concentration in certain financial services sectors, but also notes that there has been a trend towards internationalisation by the largest Canadian institutions. Other key trends mentioned in the paper are noted below.

Growing acceptance of electronic transactions

The paper notes that most routine financial transactions are now conducted electronically, and that many consumers are embracing new technologies such as online and mobile banking. To put this in context, for many years the banking sector in Canada has been dominated by six large banks that maintain extensive branch networks covering the entire country. The trend towards greater acceptance of electronic means of transacting has led many of the large banks to pursue efficiencies and adjust their branch networks.

The paper notes concerns about the implication of this trend both for consumers and for the profitability of some banks.


Closely related to consumer attitudes to e-commerce is the emergence of a financial technology (fintech) sector. The paper notes that much of the recent innovation regarding financial services is the product of emerging fintech start-up companies. Some of these have developed consumer-facing technology in the areas of payments, lending and investment management. Others have focused on supporting infrastructure including data analytics, funds transfers, smart contracts, cybersecurity and currency exchanges. Some fintech companies have adopted distributed ledger technology (blockchain) to record and validate transactions.

While the paper notes the positive contribution that fintech companies are making to innovation and competition in the financial services sector, it also notes that this trend raises questions about the adequacy of existing consumer protection laws to address the changes being introduced through this technology. It also questions whether it is necessary to introduce changes to the regulatory framework to ensure a level playing field between fintech companies and regulated financial institutions.

Higher level of concentration

Concentration remains a feature of the sector, with the largest competitors in the banking industry controlling 93% of the total assets of their respective industry. Again, the concern expressed is whether there is adequate competition in these sectors given the high levels of concentration.

Policy objectives

The paper identifies three objectives that the government says must be balanced in the policy framework:

  • Stability – is the sector safe, sound and resilient in the face of stress?
  • Efficiency – does the sector provides competitively priced products and services; does it pass efficiency gains to customers and accommodate innovation; and does it effectively contribute to economic growth?
  • Utility – does the sector meets the financial needs of an array of consumers, including businesses, individuals and families, and are the interests of consumers protected?

Questions for consultation

The paper invites comment on the following questions:

  • What are your views on the trends and challenges identified in this paper? Which other trends or challenges do you expect could significantly influence the financial sector going forward?
  • How well does the financial sector framework currently balance trade-offs between the three core policy objectives of stability, efficiency and utility?
  • What lessons could be learned from other jurisdictions to inform how to address emerging trends and challenges?
  • What actions could be taken to strengthen the financial sector framework and promote economic growth, including with respect to the identified themes? How should those actions be prioritised? Examples include the following:
    • How should the financial sector framework support innovation and competition while maintaining the stability of the system?
    • How can the financial sector framework best promote competition, including by encouraging new entrants and fostering the growth of small entities and other players?
    • How can the benefits of an internationalising financial sector best be obtained while ensuring the safety and soundness of the sector?
    • How can the financial sector framework support financial firms to best serve the evolving needs and interests of consumers?
    • Are Canada's federal financial sector oversight bodies well positioned to support the sector in the future?
  • What other actions should be taken to ensure that the financial sector framework remains modern and technically sound?

For further information on this topic please contact John Jason at Norton Rose Fulbright Canada by telephone (+1 416 216 4000) or email ( The Norton Rose Fulbright Canada website can be accessed at

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.