To strengthen competition in Canada’s financial sector, the federal government must implement consumer-driven banking and then think bigger, according to a report by Fintechs Canada and the Canadian Anti-Monopoly Project (CAMP). The two organizations recently collaborated to produce a joint submission to the Department of Finance’s consultation on strenghtening competition in the financial sector.
“False is the idea that there is always a trade-off between financial sector stability and competition,” reads the report. “The major reason that financial crises have not materialized in Canada is Canada’s approach to supervising financial institutions, not deliberate choices by the government to suppress competition.”
The report’s recommendations are comprehensive. Fintechs Canada and CAMP argue the government should eliminate unnecessary barriers to entry in the financial sector by giving finanicial sector regulators mandates to promote competition, create a college of regulators to improve regulatory coordination and harmonization, modernize Canada’s approach to granting bank licenses, expand access to and promote fair and level pricing of critical payments infrastructure, and complete the implmentation of consumer-driven banking.
“Canada’s financial sector regulators are an important piece of this puzzle, and recruiting them in the service of creating a more competitive financial sector is key to the success of the project,” reads the report. “Today, none of the federal financial sector regulators has a mandate to maintain a competitive financial sector. Though this doesn’t explicitly prevent regulators from promoting competition, it discourages regulators from seriously considering the competitive effects of their decisions and acting accordingly.”
Fintechs Canada and CAMP note that other jurisdictions, such as the United Kingdom, Australia, and the United States, better empower their regulators to promote competition in the financial sector.
The report also recommends that the government strenghten merger control and do regular reviews of competition in the financial sector, making the Minister of Finance accountable to receive recommendations from the Competition Bureau and publicly respond to them to explain how the Minister of Finance will act upon the recommendations.
“We believe Canada needs a long-range, comprehensive policy agenda— constituting a whole-of-government approach—to promoting competition in the financial sector without compromising its stability,” the report concludes.
With a mission to bring about a more competitive and innovative financial sector, Fintechs Canada is an industry association of Canada’s most innovative financial technology companies. Collectively serving millions of Canadians on a daily basis, the association’s membership includes Canada’s fintech market leaders, global fintech companies, fintech-friendly financial institutions, and the technology companies that power the credit union space, among others.
CAMP is a think tank dedicated to addressing the issues caused by monopoly power in Canada. CAMP produces research and advocates for policy proposals to make Canada’s economy more fair, free, and democratic.
Click here to access the full report.
