Ottawa signals it will accept more risk for more bank competition

The newly announced federal budget marks a shift in Canada’s approach to bank regulation, toward competition and growth. Speaking with Bloomberg, partner and co-head of the firm’s Financial Services, Bank Regulatory and Insurance Regulatory practices, Blair Keefe, called the proposals a “massive change.”

He pointed in particular to the plan to add competition OSFI’s mandate, which has traditionally focused on safety and resilience.

“They’re saying we need more competition and we’re willing to accept more risk as a result,” Blair said.

He also highlighted the proposal to raise the bank ownership threshold from C$12 billion to C$25 billion in equity. He explained that the current limit can slow growth long before a bank reaches it, because expanding could eventually force a controlling shareholder to sell down its stake.

“If you’re really successful and you grow your business fast, the bad news is you basically have to sell it now,” he said.

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The higher threshold could also make Canada more attractive to new and international players by giving them more room to grow.

“If major international fintechs or others want to come in and grow their business, they’re not staring down this C$12 billion threshold,” Blair said.

“That gives them a lot of runway to really create a good-sized bank in Canada.”

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