Ottawa's decision to crack down on mortgage prepayment penalties is one of the measures that signals the government is decreasing aid programs for the banks and ramping up measures to protect bank customers now that the severity of the financial crisis has faded.
The government's most significant move is arguably its decision to take control of bank ombudsmen. Ottawa is effectively grabbing the reins of the self-policing mechanism that the banking sector has used to deal with customer complaints for 14 years.
"What you're seeing is Ottawa taking a more hands-on approach to how dispute resolution will evolve," said Douglas Melville, head of the Ombudsman for Banking Services and Investments. "By backstopping it with regulation, the government's saying it's really the end of the voluntary phase and we're moving into a new type of regime for consumer protection."
Finance Minister Jim Flaherty's 2010 budget says that Ottawa will require banks to belong to an "approved" third-party dispute handling body. It is also going to establish minimum standards for how banks deal internally with customer complaints.
The backdrop to the move is a long-simmering tension between some players in the banking industry - most notably Royal bank of Canada, the country's largest bank - and OBSI.
The industry created OBSI in 1996, after Ottawa threatened to create an ombudsman because of complaints from small-business about banks' lending practices. OBSI is funded by the hundreds of banks, investment dealers, and other financial institutions that participate.
RBC quietly announced in late 2008 that it was introducing a new "independent dispute resolution process" for its banking customers. The bank said OBSI was too slow. So it turned to ADR Chambers, an arbitration firm, to provide an appeal process for customers who were not satisfied with how RBC's internal ombudsman dealt with their complaint. (Most investment firms are required to participate in OBSI, so RBC's investment business still uses it).
Mr. Melville's predecessor David Agnew spoke out against RBC's move, saying it could damage the integrity of the system. The bank's withdrawal coincided with a period in which OBSI was looking to beef up its powers, and its budget.
Mr. Flaherty's decision means that ADR Chambers will now have to be approved by Ottawa, as will OBSI.