Fintechs Canada is calling on the federal government to significantly expand deposit insurance coverage, warning that the current framework undermines competition by favouring the country’s largest banks.
In its submission to Finance Canada’s consultation on modernizing the deposit insurance system, the association recommended raising coverage limits to $250,000 per category for retail depositors and $500,000 for non-retail depositors.
The association also urged the government to introduce temporary high-balance protection of up to $5 million for Canadians experiencing major life events such as a home sale, inheritance, or settlement. Other recommendations include unlimited coverage for registered and tax-free accounts such as RRSPs, TFSAs, and RESPs, and stronger disclosure requirements to ensure depositors know exactly which of their funds are insured.
Adriana Vega, executive director of Fintechs Canada, said the reforms are about both stability and fairness.
“A higher deposit insurance threshold would increase consumers’ confidence in the system as a whole, while allowing smaller institutions to compete more fairly, enabling competition and greater innovation, leading to lower costs. Addressing competitive distortions, both real and perceived, is critical,” Vega said.
Finance Canada’s consultation paper floated more modest changes, such as raising the limit to $150,000, offering temporary coverage up to $1 million for certain life events, and merging registered and tax-free accounts into one unlimited category. Fintechs Canada’s proposals go further, arguing that larger reforms are needed to bring Canada in line with international peers and reduce barriers to competition.
The government is expected to use feedback from stakeholders to inform policy recommendations to the minister of finance.
To see the full submission, click here.
