Financial regulation in Canada: who does what (2024)

Canada’s system of financial regulation is important for both customers and financial institutions alike. It ensures that the rights and obligations of all are legally protected, and violators are properly punished.

What are the financial regulations in Canada?

Banks and financial institutions in Canada are heavily regulated by the government, and there are several reasons why:

• to eliminate the risk of a failing or weak financial system in the country
• to protect consumers from unfair practices or fraudulent acts
• to increase the public’s confidence over these financial institutions

Who regulates Canadian banks?

Financial regulation is a shared responsibility between the federal government and the provincial/territorial governments.

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The federal government is primarily responsible for regulating banks, whether domestic or branches of foreign banks, as provided by the country’s Bank Act.

The provincial governments, on the other hand, have jurisdiction over other financial institutions such as:

• credit unions and caisses populaires
• loan and trust companies
• mortgage brokers/dealers
• mutual fund companies
• securities dealers

Both the federal and provincial governments regulate insurance companies and trust and loan companies.

Who are the financial regulators in Canada?

Canada’s system of financial regulation is implemented by different government institutions that have different – but sometimes overlapping – roles and responsibilities.

They may also cover one or several financial institutions. This will depend on the law or statute which empowers these regulators.

Department of Finance Canada

Headed by the Minister of Finance, the Department of Finance Canada is the country’s overall financial regulator. Aside from being a financial regulator, the Department also has policy-making powers.

Among the mandates or responsibilities of the Department of Finance include:

• preparing the annual federal budget
• developing financial reports for legislative purposes
• forming policies and legislation as to taxes, tariffs, and regulation of the financial sector

In general, the Department ensures the stability of the country’s financial sector by proposing and implementing laws and policies, in coordination with the other financial regulators.

Bank of Canada

As Canada’s central bank, the Bank of Canada is not directly involved in the financial regulation of banks and other institutions.

However, it can still be considered a financial regulator because of its mandate. Among its many core functions, the Bank helps in ensuring the stability of the country’s financial system by:

• providing central banking services (e.g., liquidity and lender-of-last-resort facilities)
• acting as an oversight and resolution authority for financial market infrastructures (FMIs)
• regulating the country’s inflation-control target and flexible exchange rate

Financial Consumer Agency of Canada (FCAC)

The FCAC is a federal agency which has jurisdiction over federally regulated financial institutions. The FCAC’s role is to assist these institutions in their compliance with laws and regulations on consumer protection.

When the rights or interests of consumers are affected, FCAC may also receive complaints against financial entities. The FCAC investigates in case there has been a breach of market conduct obligations.

Although FCAC does not directly resolve these complaints, the Agency ensures that each financial institution has a complaint-handling process. Consumers are encouraged to follow the process when filing a complaint with their financial institution:

1. File a complaint with the financial institution itself, through their representative or their complaint-handling department.
2. If the complaint has not been resolved, it may be escalated with an external complaints body or ECBs (for banks) or an independent complaint-handling organization (for trust and loan companies).

ECBs of banks may be:

• Ombudsman for Banking Services and Investments (OBSI)
• ADR Chambers Banking Ombuds Office (ADRBO)

Payment card network operators are also governed by the FCAC. The Agency ensures that these operators are compliant with the Payment Card Networks Act.

These rights of consumers are without prejudice to their right to file a court action against their financial institution.

Watch this video to know more about the complaint-handling process of banks:

Consumers from Calgary or Edmonton may consult with one of the Lexpert-Ranked best banking lawyers in Alberta to file a complaint against a financial institution.

Office of the Superintendent of Financial Institutions (OSFI)

The OSFI is the agency which governs federally regulated financial institutions (FRFIs). It is an independent agency which directly reports to the Minister of Finance.

It ensures that these FRFIs are compliant with the minimum funding requirements and other conditions set by law.

These FRFIs include:

• banks, including domestic banks, foreign bank subsidiaries, and foreign bank branches
• cooperative credit associations
• federally incorporated or registered trust and loan companies
• fraternal benefit societies
• insurance companies, including life and property or casualty insurance companies

Among the functions of OSFI regarding financial regulation include:

• guarantee bank deposits through the Canadian Deposit Insurance Corporation (CDIC)
• supervise FRFIs as to its policies and procedures against integrity or security threats
• ensure that FRFIs and pension plans are sufficiently funded

Canada Deposit Insurance Corporation (CDIC)

The CDIC is a federal Crown corporation whose mandate is:

• to protect the eligible deposits in CDIC-member institutions, whether in Canadian or foreign currency
• to resolve CDIC-member institutions in case of failure, which may include reimbursing insured deposits, sale of shares or assets, amalgamation, recapitalization, or restructuring.

There are certain deposits that are covered by the CDIC, such as:

• mutual funds
• stocks and bonds
• exchange traded funds (ETFs)
• cryptocurrencies

Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)

FINTRAC is the intelligence agency which is empowered to detect, prevent, and deter money laundering and terrorist financing across the financial institutions.

It does this by ensuring that these institutions comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.

In addition, FINTRAC may also impose administrative monetary penalties on institutions for their non-compliance with the law. Criminal charges may also be filed against these institutions for their violations.

Canadian Securities Administrators (CSA)

Since Canada does not have a single federal securities regulator, financial regulation of securities is vested in the provinces and territories. These individual provincial and territorial securities regulators banded together to form the CSA.

CSA is mainly involved in the harmonization of the securities regulation in the country. This means that it is still the provincial or territorial regulators that will handle complaints regarding securities violations.

Know about the different laws on Canada’s financial regulation,the institutions that it governs, and how it affects these institutions.

Know more about Canada’s system of financial regulation by consulting with the best banking lawyers in Canada as ranked by Lexpert.