On February 27, 2018, the Canadian federal government introduced the 2018 federal budget (Budget 2018). The budget plan document includes a number of proposals that will impact the Canadian financial sector. The summary below highlights these proposals (other than tax-related changes that are covered in Osler’s Federal Budget Briefing 2018).
Review of open banking
Consistent with the government’s previously disclosed intentions on this topic, the government has again indicated that it proposes to undertake a review of the merits of open banking (e.g., consumers’ ability to share their financial data between their financial institution and third parties) in order to assess whether open banking would deliver positive results for Canadians with the highest regard for consumer privacy, data security and financial stability.
Modernizing the financial sector framework
Budget 2018 proposes to introduce legislative amendments to address the following:
- greater flexibility for financial institutions to undertake and leverage broader FinTech activities that enable the delivery of financial services in new and innovative ways;
- permitting life and health insurance companies to make long-term and predictable investments in infrastructure;
- providing prudentially regulated deposit-taking institutions, such as credit unions, flexibility to use generic bank terms, subject to disclosure; and
- renewing the sunset date in the federal financial institutions statutes.
Budget 2018 also indicates that the government intends to introduce additional legislative amendments (these appear not to be as high on the priority list as the above-noted items) to address: modernizing financial institutions’ corporate governance; providing for the continued clarity and prudential integrity of federal financial sector legislation, as well as targeted updates to streamline the federal framework and to ensure that it continues to support a stable, competitive and resilient financial sector.
Enhancing consumer protection in banking
Budget 2018 proposes to introduce legislation that would strengthen the Financial Consumer Agency of Canada’s tools and mandate and continue to advance consumers’ rights and interests when dealing with their banks. This development is not surprising given the sales practices review initiated by FCAC and OSFI in early 2017.
Supporting an innovative retail payments system
The government intends to introduce legislative amendments to implement a new framework for the oversight of retail payments following the conclusion of its consultations with the relevant stakeholders. The budget plan document indicates that the government also proposes to launch a review of the Canadian Payments Act to ensure that Payments Canada is well-positioned to continue to fulfill its public policy objectives of ensuring the efficiency, safety and soundness of its systems. The review will include consultations with stakeholders, including provinces and territories.
Budget 2018 also includes the government’s intention to introduce proposals relating to:
- legislative amendments to the Canada Deposit Insurance Corporation Act to modernize and enhance the Canadian deposit insurance framework;
- legislative amendments that would implement a resolution framework for Canada’s systemically important financial market infrastructures; and
legislative amendments to facilitate the maintenance of high-quality bank notes in the money supply and to provide greater clarity on the bank notes that can be used as legal tender. Following these legislative amendments, the government intends to initiate the process to remove the legal tender status of bank note denominations no longer issued by the Bank of Canada (i.e., $1,000, $500, $25, $2 and $1). The Bank of Canada would continue to honour these bank notes and exchange them at their face value.