OSFI officially launches targeted fast-track new entry regime

On June 25, the Office of the Superintendent of Financial Institutions (OSFI) officially launched its streamlined approvals framework for targeted new entrants seeking to establish a federally regulated financial institution (FRFI). As noted in our earlier bulletin, the streamlined process will allow OSFI to be more agile and take a more risk-based approach to new applications. The framework provides a clearer, more predictable pathway to a obtaining a federal license through defined phases, established timelines, and a focused, risk-based review. Key changes and features of the framework are highlighted below.

Why it matters

• OSFI’s new streamlined approvals framework introduces a phased, predictable process for establishing federally regulated financial institutions, with a stronger emphasis on risk-based review and faster timelines.
• It applies to provincial credit unions and innovative financial entrants (colloquially referred to as fintechs), requiring them to meet defined screening criteria demonstrating operational strength, scalability, or genuine innovation.
• The three-phase process—readiness assessment, formal application, and operational readiness—largely mirrors the existing framework but adds earlier suitability screening, enhanced integrity/security expectations, and tailored supervisory oversight.

Screening criteria

The streamlined approvals framework applies to provincial credit unions (PCUs) seeking to continue federally, as well as entities with innovative or emerging banking models seeking to incorporate or continue as a bank or trust and loan company. OSFI’s dedicated landing page outlines the specific eligibility criteria for each applicant type and explains how OSFI will assess suitability for the streamlined framework.

PCUs

PCU applicants should be able to demonstrate: a well-established business model, operating history, and supervisory track record under provincial oversight; the capacity to maintain adequate capital over time through retained earnings; systems and management capacity sufficient to support effective scaling at the federal level; a planned approach to engaging with members and the relevant provincial regulator; and a clear and viable legislative pathway in the home province to effect provincial discontinuance within a reasonable timeframe.

Innovators

Innovator applicants must demonstrate that their proposed business model includes either innovative methods or products.

Innovative methods may involve novel operating models, capabilities, distribution frameworks, or end-to-end process designs that result in demonstrated improvements compared to existing industry practices in one or more of the following areas: efficiency, cost, speed, resilience, accessibility, or risk management.

Examples of innovative products include novel account types, pricing or fee structures; or integrated bundled financial services that deliver differentiated and measurable value to customers.

Application process

The application process largely mirrors the existing framework, consisting of:

• an initial readiness assessment (Phase 1);
• a formal application (Phase 2); and
• for incorporation (as opposed to continuances), an operational readiness assessment (Phase 3)¹.

The key distinction under the streamlined framework is OSFI’s commitment to a more risk-based review process and to greater predictability in timelines, subject to the quality and completeness of submissions, completion of required security checks, and applicant responsiveness.

Phase 1

Phase 1 assesses whether an applicant is well suited to proceed under the streamlined framework before submitting a formal application. In addition to the standard Phase 1 information requirements published on OSFI’s website, applicants must:

• provide a self-assessment of readiness and eligibility against the screening criteria; and
• acknowledge their willingness to proceed under a risk-based supervisory approach, including the potential imposition of conditions, restrictions, or other mitigants at entry, as appropriate.

After receiving the require materials, OSFI will schedule an initial meeting with the applicant. Within 4 weeks of this meeting, OSFI will issue an Initial Readiness Assessment letter outlining its preliminary views on the applicant’s suitability and expectations for the proposed application.

For PCU applicants, a draft member package, including the draft notice required pursuant to the Disclosure on Continuance Regulations (Federal Credit Unions), must be shared with and approved by the Superintendent prior to the PCU conducting a member vote and advancing to Phase 2.

While OSFI’s guidance does not explicitly state whether this approval is separate from the Phase 1 assessment (which is expected to be completed within 4 weeks of the meeting with OSFI), our expectation is that OSFI will first complete Phase 1 since it may not be practical or efficient for a PCU to prepare for a member vote without having some level of comfort that OSFI will permit the institution to proceed to Phase 2.

Phase 2

During Phase 2, OSFI will conduct a comprehensive, risk-based review tailored to the applicant’s readiness and risk profile. While the Phase 2 information requirements are the same as the existing Phase 2 information requirements for non-streamlined applications, additional elements reflect OSFI’s updated guidance and its expanded mandate relating to integrity and security.

Given the heightened execution risk and limited recovery options for new entrants, Phase 2 also includes an assessment of the applicant’s exit planning for an orderly wind-down, if required. This assessment is not intended to prevent failure but to mitigate systemic risk and limit contagion within the financial system.

Applicants must publish notice of their intention to apply for Letters Patent in the Canada Gazette and a newspaper in general circulation near their head office once a week for four consecutive weeks before they may formally apply. In practice, many applicants have historically submitted Phase 2 materials “in draft” concurrent with or prior to publishing this notice so that OSFI can begin its review during the statutory notice period. We do not believe that this practice needs to change, but for purposes of establishing formal timelines (with OSFI targeting completion of Phase 2 within 12 months), OSFI will not issue an acknowledgement of filing—and therefore will not start the review clock—until:

• the notice period has expired; and
• OSFI confirms that all required materials have been submitted.

Determining whether a submission is “complete” may present challenges, as it will depend not only on whether all required items are provided, but also on whether their substance is sufficiently responsive. This introduces potential uncertainty where applicants and OSFI differ in their views on completeness.

Phase 3

OSFI had indicated that it may issue an Order to Commence and Carry on Business (OCCB) as early as three months following the issuance of Letters Patent. The Phase 3 information requirements are the same as the existing Phase 3 requirements, and OSFI’s focus will be on assessing whether key personnel, policies, processes, and systems meet OSFI’s expectations.

Under the streamlined framework, however, OSFI may permit applicants to finalize certain policies, processes, or systems after receiving the OCCB, subject to potential conditions or restrictions (such as limits on activities, growth, or product scope) where gaps exist and are supported by a defined remediation plan. As noted in the footnote, where an applicant is continuing under the federal regime, Phases 2 and 3 are combined.

Public dashboard

Applicants may choose whether to participate in an OSFI-managed public dashboard that tracks application progress. A sample dashboard is available on OSFI’s website. As with the formal review timelines, one potential challenge will be aligning with OSFI on when each phase formally begins for tracking purposes.