Finance Minister Bill Morneau.Adrian Wyld/The Canadian Press
The federal Department of Finance has identified the areas it plans to focus on in its review of the Bank Act, including regulations governing financial technology and examining whether credit unions should be permitted to use terminology such as "banking."
In a white paper released on Friday, which kicks off the second stage of the consultation process, the federal government said it is seeking input on a number of topics. These range from how to better foster collaboration between established financial institutions and fintech startups to whether to grant life and health insurers greater powers to invest in infrastructure.
The Office of the Superintendent of Financial Institutions (OSFI) announced on Friday that it is freezing its crackdown on the use of the words "bank," "banker" and "banking" by credit unions and other smaller financial institutions as it awaits the results of the consultation process.
OSFI released an advisory in late June, after at least a year of talks with non-bank financial institutions, promising stricter enforcement against the misuse of banking-related terms. Currently, the Bank Act prohibits any person or company other than a bank from using such terms to describe a business, with penalties ranging from fines to criminal charges against officers and directors.
Finance Minister Bill Morneau vowed last month to take a closer look at the issue, after meeting with the Canadian Credit Union Association.
The trade group, which represents 278 credit unions outside of Quebec, has argued that a strict ban on the banking terminology will be costly for its members and make the sector less competitive with the big banks.
"We are pleased that the federal government has recognized the need for a common-sense review of this issue," association president and chief executive Martha Durdin said in a statement.
"Credit unions provide banking services to millions of Canadians and need to speak to them in a way they can understand," the statement added.
The Bank Act review, which is expected to be completed by March 29, 2019, will also explore a number of other issues, including:
The merits of open banking, a framework that allows consumers to share their own banking information with other financial services. Open banking has the potential to increase competition and innovation in the sector.
How to modernize the language governing the type of information and technology activities that federally regulated financial institutions are allowed to undertake in-house.
Ways to limit the system-wide risks that an extreme earthquake could pose to federal property and casualty insurers.
Whether to give federally regulated financial institutions greater flexibility to make non-controlling investments in financial technology, or fintech, companies.
The Department of Finance says it will be accepting submissions on these topics until Sept. 29 of this year.
The review will also tackle whether to provide life and health insurers with more scope to invest in infrastructure, an asset class that has gained popularity among pension funds and other long-term investors in recent years as an alternative to bonds in a low-interest-rate environment.
While insurers have been active participants in the infrastructure debt market – including public-private partnerships in Canada – they are limited in the amount of equity and voting rights they can have in individual companies. An industry group representing these insurers previously called for relaxing these legislative and regulatory restrictions in the case of infrastructure.
"As you know, there is a significant need to renew and build out Canada's infrastructure assets and insurers have a strong appetite to do more," said Stephen Frank, CEO of the Canadian Life and Health Insurance Association Inc.
With files from Jacqueline Nelson
Alexandra Posadzki