Torys on Budget 2026: financial services and banking

On November 5, the federal government released Budget 2026: Masters of Our Destiny¹. For the financial services sector, Budget 2026 builds on the competition, consumer protection, and payments reforms launched in Budget 2025 and proposes significant changes to how federally regulated financial institutions (FRFIs) are licensed, owned, supervised, and held accountable to consumers.

What you need to know

• Competition and market structure. The Office of the Superintendent of Financial Institutions (OSFI) would receive a new secondary competition mandate, new entrants would get a one-year statutory decision timeline and self-dealing relief, and the widely held threshold for banks would rise from $12 billion to $25 billion in equity.
• Deposit insurance. CDIC coverage would rise to $250,000, with temporary high-balance coverage for certain life events and no limit for eligible deposits in registered and tax-free accounts.
• Consumer protection. The Budget introduces new measures target fees, credit card payment allocation, payday lending, branch closures, and economic abuse. Proposed regulations have already been published to deliver on the budget promise of facilitating the transfer of registered and investment accounts and banks through various measures, including prohibiting the charging of transfer fees for registered and investment accounts.
• Payments and stablecoins. The Bank of Canada’s oversight of payment service providers would be strengthened, and FRFIs would be able to issue stablecoins only through subsidiaries regulated under the Stablecoin Act.
• Fraud and financial crime. A legislated Multi-Sector Anti-Fraud Framework would cap consumer liability for unauthorized transactions at $0 absent gross negligence, and FRFI AML/ATF supervision would move from FINTRAC to OSFI.

Competition and market structure

Supervision and market entry

A secondary competition mandate for OSFI

The Budget proposes to amend the Office of the Superintendent of Financial Institutions Act to introduce a secondary competition objective for OSFI. In practice, this means that considerations such as proportionality, compliance burden, and market impacts should be reflected more clearly and consistently in how OSFI regulates and supervises FRFIs. This is a significant change both from a policy perspective and from a practical standpoint.

From a policy perspective, it is significant because the Report of the Task Force on the Future of the Canadian Financial Services Sector (the MacKay Task Force) in 1998 suggested that OSFI should be given a dual mandate to focus equally on competition; however, while most of the Report’s recommendations were implemented in 2001, OSFI’s mandate was not changed. We understand that the government wanted OSFI to focus on its prudential mandate.

From a practical perspective, it should greatly assist OSFI in implementing its fast-track new entry regime , as the regime provides OSFI with significantly more cover to allow institutions into the federal system before they are fully “OSFI ready”. It will also give institutions a basis to push back when OSFI seeks to impose certain prudential measures that would have a negative impact on competition, in cases where those measures outweigh the prudential benefit.

Faster, more predictable entry

• The Budget proposes to make amendments to the Bank Act, the Trust and Loan Companies Act, and the Insurance Companies Act that would establish a one-year timeline for making decisions on applications by new entrants. While this would be a helpful amendment as it clearly supports OSFI‘s fast-track initiative, we are not sure the extent to which it will actually have a meaningful impact, as we suspect that the one-year period will not commence until OSFI confirms that it has received a reasonably complete application (which could take months if OSFI does not feel that the initial application was sufficiently robust). Nevertheless, we have been very impressed with OSFI on its commitment to meeting the fast-track timelines, subject to contingencies outside of their control relating to the quality of advisors and materials submitted by applicants.
• Proposed amendments would also exempt new entrants from self-dealing restrictions that limit how they structure and set up their businesses while they wait for OSFI to issue an order to commence and carry on business. This is important flexibility because on new incorporations, the Minister of Finance will issue letters patent incorporating the institution up to 12 months before OSFI issues the order to commence and carry on business. Once the letters patent have been issued, the institution becomes subject to the self-dealing regime under the federal financial institution statutes.

Ownership rules and federal credit unions

To help mid-sized challenger banks enter and grow, Bank Act amendments would:

• raise the widely held threshold from $12 billion to $25 billion in equity;
• exempt foreign bank subsidiaries with under $8 billion in equity from the 35% public holding requirement, if the foreign parent is widely held and listed on a recognised foreign exchange; and
• give qualifying cooperative shareholders more flexibility to invest in and control a federal credit union, subject to ministerial approval.

With respect the last bullet, the proposed amendment would add more flexibility, but we’re not expecting that this will result in any significant changes, as federal credit unions can already issue shares to non-members and provide the holders of those shares the ability to elect up to 20% of the directors (and none have chosen to do so).

Expanded exit options

The government also intends to amend the Bank Act and the Trust and Loan Companies Act to expand the voluntary exit options available to deposit-taking institutions, allowing more flexibility to transfer assets and liabilities to other financial institutions while maintaining depositor protections and oversight of significant transfers. The stated aim is to make it easier for solvent but troubled institutions to pursue private market solutions and will be important particularly for new “fintech” entrants.

Funding, deposit insurance, and prudential tools

Modernizing the deposit insurance framework

The Canada Deposit Insurance Corporation Act amendments would:

• raise deposit insurance coverage to $250,000;
• add temporary high-balance coverage for certain life events, such as selling a home;
• remove the cap on eligible deposits in registered and tax-free accounts;
• mandate a framework review every 10 years and give CDIC access to policy data; and
• allow provincial trust and loan companies to join CDIC only by continuing federally.

The government will also work with small- and medium-sized deposit-taking institutions to explore options to strengthen their access to stable, cost-effective funding. As the framework is implemented, CDIC members should expect corresponding changes to premiums, disclosure, and data reporting.

These are important changes which we believe are long overdue and should be particularly helpful for provincial credit unions because many of the provincial deposit insurance regimes already provide $250,000 in coverage (and some provide for unlimited coverage); therefore, it could be challenging for them to predict the reaction from depositors if they decide to continue federally.

OSFI enforcement and actuarial services

The Budget proposes strengthening OSFI’s administrative monetary penalties regime. The details of the enhanced penalty regime will be important to understand once available, but we don’t believe any changes to the existing regime are necessary. All the institutions that we provide regulatory advice to are very focused on regulatory compliance and don’t need an administrative monetary penalty to make them do the right thing. Furthermore, OSFI has many additional levers under the existing statutory frameworks that it could leverage in order to encourage certain behaviour.

Infrastructure investments by life insurers

As alluded to in our 2025 review of the financial sector statutes, the Investments in Permitted Infrastructure Entities Regulations under the Insurance Companies Act (PIE Regulations) are drafted narrowly: as a practical matter, they have made it challenging for life insurance companies to make permitted acquisitions. The 2026 Budget announced the government’s intention to amend the Insurance Companies Act and PIE Regulations to expand infrastructure investment opportunities for Canadian life insurers by broadening the scope of permitted infrastructure investments. This is a welcome development, both for the life insurance industry but also for the Canadian economy in general.

Consumer protection

Budget 2026 proposes a broad suite of consumer protection measures, ranging from initiatives aimed at addressing the Financial Consumer Agency of Canada’s (FCAC’s) findings in its recent report, A Review of Banking Fees in Canada², to measures that would strengthen FCAC’s supervisory and enforcement authorities over regulated entities.

While further detail will be required to fully assess the implications of the proposed amendments to the Bank Act and the Financial Consumer Agency of Canada Act, the government’s stated objective is to “ensure the federal Financial Consumer Protection Framework continues to operate clearly and consistently as financial products and services evolve”. To achieve this, the government will introduce amendments that better reflect FCAC’s role in handling complaints, confirm consumers’ entitlement to redress where interest is unpaid or incorrectly credited, and streamline approval of information-sharing agreements.

We understand that the proposal to “streamline the approval of information-sharing agreements” is intended to clarify that ministerial approval is not required for FCAC to enter into information-sharing arrangements with provincial enforcement authorities. Facilitating such information sharing is becoming increasingly important as governments and regulators seek to strengthen coordination in the fight against fraud.

The government’s proposal to “confirm consumers’ entitlement to redress where interest is unpaid or incorrectly credited” appears intended to expand section 627.977 of the Bank Act, which currently provides for redress where a consumer has been charged a fee or penalty not provided for in the applicable agreement. The amendment would extend this redress obligation to unpaid or incorrectly credited interest.

Particularly noteworthy is the proposal to amend the Financial Consumer Agency of Canada Act to clarify that the current higher maximum administrative monetary penalty (AMP) may apply where a contravention began before the increased maximum came into force but continued thereafter. The proposal appears intended to address the Federal Court’s decision in Community Trust Company³, in which the Court held that violations occurring before April 2020—when higher AMP limits came into force—had to be assessed under the penalty regime in effect at the time of the conduct. The proposed amendments would therefore enable FCAC to apply the higher AMP regime to continuing contraventions that began before April 2020 but persisted after the new maximum penalties came into force.

Improving affordability

Several Budget measures are aimed at advancing the government’s affordability agenda by helping Canadians better manage their financial affairs. In particular, the government is proposing measures to make the cost of financial products and services easier to understand and to reduce unnecessary borrowing costs. Two of these measures respond to issues examined in FCAC’s recent report, A Review of Banking Fees in Canada, which considered how banking fees are structured and disclosed, as well as consumers’ experience with those fees.

The first measure is the government’s proposal to develop regulations requiring banks to provide consumers with a single, clear annual statement of the fees paid on their chequing and savings accounts: an approach already used in Europe. The measure is intended to help consumers compare bank services transparently and ensure that small fees do not go unnoticed as they add up over time. Banks should anticipate systems work to consolidate and calculate fee data at the account level.

The second measure builds on a commitment made in Budget 2025, on which the Department of Finance has already taken action. On November 7, 2026, the Department of Finance published proposed Regulations Amending the Financial Consumer Protection Framework Regulations (Investment Account Transfers) in the Canada Gazette aimed at facilitating the transfer of bank-held investment accounts. The proposed measures would apply to investment accounts held by banks and would:

• prohibit fees (typically about $150 per account today) for closing a registered or non-registered investment account or transferring it in whole or in part, unless the request comes within 90 days of first funding;
• require the delivering bank to provide asset and cash details within two clearing days, both institutions to flag impediments within two more, and settlement within 10 clearing days after the delivering institution receives the customer’s instructions for resolving impediments, largely aligned with CIRO’s proposed rules;
• require bank issuers of deposit-type instruments (such as GICs) and principal-protected notes to re-register them within three business days of a request, where product terms allow; and
• require banks to disclose transfer processes, costs, impediments, timelines, and complaint procedures online and in account agreements.

Applying credit card payments

The government will also consult on legislative amendments that would require credit card payments above the minimum amount to be applied first to the balance carrying the highest interest rate, as is currently the case in Québec. Because the measure is still in the consultation stage, there remains room for discussion about how it would be implemented. Card issuers that do not already follow the Québec approach nationally will need to assess the impact on payment allocation logic and revenue.

Cracking down on predatory lending

Following Alberta’s example, the Budget proposes to (i) amend the payday lending exemption in section 347.1 of the Criminal Code to extend the minimum time for repayment of payday loans to 42 days and require repayment in instalments, and (ii) prohibit credit insurance charges on payday loans. Provinces would need to amend their payday loan legislation to align with the Criminal Code requirements.

Access to banking services

Bank branch closures and remote account opening

Building on Budget 2025, Bank Act amendments would require banks to post branch closure notices online, waive fees for closing or transferring affected accounts during the prescribed period, and authenticate government-issued ID for remote account opening, consistent with in-person requirements.

Preventing economic abuse

Budget 2025 introduced a Code of Conduct for the Prevention of Economic Abuse, and the government is now negotiating its terms with banks. The proposed code would set clear expectations for how banks prevent economic abuse, recognize warning signs, and respond appropriately, backed by staff training, internal safeguards, escalation processes, public reporting, and FCAC oversight. As we noted last year, industry stakeholders should not underestimate the compliance costs of these new measures.

Payments, digital finance, and stablecoins

Payments modernization

On November 9, the long-awaited Real-Time Rail was officially launched. The launch is a key component of the government’s objective to modernize Canada’s payment systems. Budget 2026 arrives alongside that launch and sets out the next steps. The government intends to:

• launch the next stage of payments modernization, guided by a public consultation expected in early 2027 and the statutory review of the Canadian Payments Act;
• amend the Retail Payment Activities Act (RPAA) to strengthen the Bank of Canada’s supervision of payment service providers (PSPs) and administration of the Act;
• work with the provinces and territories on common consumer protection rules for RPAA-regulated PSPs; and
• pilot voluntary digital credentials in financial services to reduce identity fraud.

PSPs are already subject to a patchwork of provincial consumer protection regimes. It is unclear what amendments are being contemplated and what PSP-specific amendments may be introduced.

We still await the operationalization of Phase 1 of Canada’s consumer-driven banking framework: a key component of payments modernization. Draft regulations to the Consumer-Driven Banking Act were pre-published on June 27, 2026 for a 60-day consultation period. On November 2, 2026, the Bank of Canada launched consultations on draft supervisory guidelines related to accreditation under the framework.

Stablecoins

With the Stablecoin Act now enacted and its regulations under consultation, the Budget proposes to amend the Bank Act, the Trust and Loan Companies Act, and the Insurance Companies Act to prohibit FRFIs from issuing stablecoins directly. Instead, they would need to issue through non-financial institution subsidiaries regulated under the Stablecoin Act. The Stablecoin Act would also be extended to foreign institutions that are not prudentially regulated in Canada, and be amended to clarify that issuing a stablecoin does not constitute accepting deposits for foreign banks and their affiliates regulated under Part XII of the Bank Act. The government will continue to consult on consumer protections in the event of issuer or custodian insolvency. These changes promote consistent regulatory treatment across issuers, and provide clarity that banks planning to offer stablecoins will need to do so through a subsidiary.

Fraud, financial crime, and national security

National Anti-Fraud Strategy

Budget 2025 announced the development of Canada’s first National Anti-Fraud Strategy. Budget 2026 takes the next step, proposing a legislated Multi-Sector Anti-Fraud Framework as its cornerstone. Financial institutions, telecommunications providers, and digital platforms would be required to prevent, detect, disrupt, and respond to fraud, and work together across sectors to resolve fraud-related complaints. Sector-specific amendments would include:

• capping consumer liability at $0 for transactions resulting from unauthorized access to any type of bank account, absent the consumer’s gross negligence;
• authorizing the Canadian Radio-television and Telecommunications Commission (CRTC) to impose fraud prevention obligations on telecommunications providers and to collect and publish data on fraudulent telecommunications; and
• authorizing the CRTC to share information pertinent to Canada’s anti-spam legislation with law enforcement on its own initiative.

The government has committed to consulting on draft legislation before introducing it. Because the $0 liability cap would apply unless a consumer is grossly negligent, banks’ fraud controls will carry significant weight.

Strengthening the AML/ATF regime

Transfer of FRFI AML/ATF supervision to OSFI

In one of the Budget’s most significant structural changes, the government proposes to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and the OSFI Act to transfer responsibility for AML/ATF supervision of FRFIs from FINTRAC to OSFI, with the stated aim of enhancing supervision and compliance of the largest financial institutions. FRFIs should prepare for a different supervisory approach, one that may integrate AML/ATF compliance more closely with OSFI’s broader assessment of governance and operational risk.

Other PCMLTFA amendments

Budget 2026 also proposes to:

• expand information sharing between FINTRAC and OSFI, enable FINTRAC obtain supervisory information from reporting entities, and clarify FINTRAC’s examination powers;
• cover higher-risk gambling, such as certain horse race betting, while exempting lower-risk activities;
• extend FINTRAC registration requirements to additional sectors, including dealers in precious metals and stones;
• amend the Canada Business Corporations Act, the Canada Not-for-profit Corporations Act and the Canada Cooperatives Act to widen government access to non-public beneficial ownership data and strengthen powers to dissolve fraudulent corporations; and
• bring forward legislation to strengthen investigative tools targeting organized criminals, modernize Criminal Code offences to address evolving forms of financial crime and strengthen penalties, and facilitate the recovery of proceeds of crime.

In particular, the proposed amendments regarding information sharing and criminal offences are consistent with the objectives of the Financial Crimes Agency, established under Bill C-29, which was introduced in April 2026.

Bill S-8: the Combatting Financial Crimes and Drug Trafficking Act

Bill S-8 was introduced on November 3, 2026, alongside the Budget⁴. It would:

• give the Minister of Finance new powers over money services business (MSB) registration applicants and registrants with FINTRAC, including in respect of reviews, ineligibility directives, undertakings, conditions, and compliance orders; require FINTRAC to deny or revoke registrations based on false or misleading information; and lower the criminal record check ownership threshold from 20% to 5%;
• make MSBs ineligible for registration under the PCMLTFA if their registration with the Bank of Canada as a PSP is revoked or refused under the Retail Payments Activities Act for national security reasons, in order to promote consistency between the two Acts;
• target unlawful crypto ATMs while preserving provincially licensed and regulated crypto ATMs and exchanges;
• bar banks and other deposit-taking entities from accepting cash deposits from anyone other than the account holder or an authorized person, except in prescribed circumstances;
• make it an offence for businesses, professionals, and public donation solicitors to accept $10,000 or more in cash in one transaction or a series of related transactions;
• permit lawful search and seizure of mail under the Canada Post Corporation Act;
• let regulated businesses receive and use law enforcement information for anti-money laundering purposes; and
• extend FINTRAC’s mandate to sanctions evasion and add a national security ground for ministerial regulations limiting or prohibiting transactions.

MSBs are highly vulnerable to money laundering and terrorist financing, and have been the subject of increased focus for the government and FINTRAC over the past couple of years (including with respect to license revocations and significant AMPs). It is therefore not surprising to see increased measures targeted towards the regulation of MSBs. For banks, the third-party cash deposit ban is the measure most likely to require operational changes at branches. Institutions receiving information from law enforcement will also need clear internal governance to respect the Bill’s limits on use.

National security divestiture authority

The Budget proposes to amend the Bank Act to give the Minister of Finance a new authority to order banks, bank holding companies, and foreign banks and their affiliates to divest investments in Canadian businesses to address national security risks, supported by an information-gathering authority. Notably, the authority would operate even after an investment has been reviewed, introducing a new element of post-closing risk for bank investments.