Financial Crime World

Title: Canadian Banking Regulations: OSFI and FCAC Oversee Compliance in Canada’s Thriving Banking Sector

Introduction

Canada’s banking sector has gained a reputation for solidity and stability despite global challenges. With banking under federal jurisdiction, the Bank Act lays the foundation for the Canadian banking system. Regulators like the Office of the Superintendent of Financial Institutions (OSFI) and the Financial Consumer Agency of Canada (FCAC) ensure compliance, consumer protection, and financial stability.

Regulatory Architecture

  • Banking in Canada falls under federal jurisdiction.
  • The Bank Act outlines banking practices.
  • OSFI supervises and regulates banks.
  • The FCAC focuses on consumer protection and market conduct.

Regulators at Work

Key regulatory bodies:

  • Department of Finance Canada
  • Bank of Canada
  • Canadian Payments Association (PC)
  • Canada Deposit Insurance Corporation (CDIC)
  • Ombudsman for Banking Services and Investments
  • Canadian Bankers Association
  • Various privacy legislation

Restrictions on Activities

  • Banks cannot deal in goods, wares, or merchandise or engage in other businesses, except as permitted.
  • Ownership rules dictate equity and public listing requirements.
  • Restrictions apply to activities, including fiduciary activities, guarantees, securities, insurance business, and personal property leasing.

Recent and Proposed Changes

  • Consumer-Driven Banking framework
  • Retail Payment Activities Act
  • Climate risk management Guideline B-15

Recent Regulatory Themes

  • OSFI’s 2022-2025 Strategic Plan
  • Revised Basel III rules

Capital Requirements

  • Capital conservation buffer
  • Leverage ratio
  • Domestic Stability Buffer
  • Additional requirements for designated systemically important banks

Small and Medium-Sized Institutions

  • OSFI’s SMSB Guideline for capital, liquidity, and risk management

Innovation in Regulation

  • Guideline E-4 on foreign entities
  • Draft Culture and Behaviour Risk Guideline
  • Intelligence-led Cyber Resilience Testing Framework
  • Proposed changes to capital and liquidity approaches to crypto-assets

Title: Regulatory Architecture of Canadian Banking

Introduction

Canada’s banking sector is regulated under federal jurisdiction with the Bank Act serving as the primary legislation.

Bodies Responsible for Banking Regulation

  • OSFI supervises and regulates banks.
  • The FCAC focuses on consumer protection and market conduct.
    • Department of Finance Canada
    • Bank of Canada
    • Canadian Payments Association (PC)
    • Canada Deposit Insurance Corporation (CDIC)
    • Ombudsman for Banking Services and Investments
    • Canadian Bankers Association
    • Privacy legislation

Title: Restrictions on Banking Activities in Canada

Restrictions on Dealing with Merchandise and other Businesses

Banks are prohibited from dealing in goods, wares, or merchandise or engaging in other businesses, except as permitted.

Ownership Rules

Ownership rules dictate equity and public listing requirements for banks.

Restrictions on Fiduciary Activities, Guarantees, Securities, Insurance Business, and Personal Property Leasing

Certain restrictions apply to these activities for banks.