The 2026 Federal Budget (“Budget 2026”) proposes to grow the Canadian financial services sector, while introducing multiple checks on possible risks raised by new bank entrants and innovative technology. It also builds out existing policy measures to support digital innovation and combat fraud. There are various other measures that may be of interest to financial service providers in banking, insurance and payments.
Increasing Competition in Financial Services
As part of the “Whole-of-Government Competition Plan” outlined in Budget 2026, the federal government proposes various reforms to expand competition in the financial sector.
The federal government announced a “secondary competition objective” for OSFI, to “help ensure that competition considerations, such as proportionality, compliance burden, and market impacts, are more clearly and consistently reflected in how OSFI regulates and supervises financial institutions.”
Budget 2026 proposes to make the process for becoming a federally regulated financial institution “more predictable, transparent, and timely”. Critically, legislative changes are proposed to establish a one-year timeline for decisions on applications by all prospective entrants under the Bank Act, Trust and Loan Companies Act, and Insurance Companies Act, which expands OSFI’s current pilot project for targeted new entrants.
Additional proposed measures to attract new entrants and increase competition in financial services include:
- Supporting the entry and growth of “mid-sized challenger banks” by amending the Bank Act to permit greater flexibility on ownership structures, by exempting foreign bank subsidiaries with less than $8 billion in equity from the public holding requirement, provided that their foreign parent is widely held and listed on a recognized foreign stock exchange, and raising the threshold at which banks become widely held from $12 billion to $25 billion in equity.
- Encouraging more provincial credit union continuances, by addressing current capital impediments through proposed amendments to the Bank Act “to provide greater flexibility for qualifying cooperative shareholders to invest in and control a federal credit union.
- Exempting new entrants from self-dealing requirements that constrain how they can organise and establish their business while awaiting final approvals.
More details may be forthcoming through a policy statement to be issued by the Minister of Finance. The Budget notes “the statement will provide guidance on how ministerial tools may be used to support the entry of federally regulated financial institutions, including credit union continuance, and promote a more proportionate and competition-supportive financial institutions framework.”
Budget 2026 also proposes a number of measures to expand funding channels to support growth and competition, and guard against possible risks, including:
- Working with small- and medium-sized deposit-taking institutions to better understand their funding needs and explore options to strengthen access to stable, cost-effective funding.
- Increasing the deposit insurance coverage limit to $250,000 for regular eligible deposits.
- Removing the deposit insurance limit for eligible deposits in registered and tax-free accounts, and providing temporary high-balance coverage for certain life events, such as the sale of a home.
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Expanding the suite of voluntary exit options available to deposit-taking institutions to make it easier for solvent but troubled financial institutions to pursue private market solutions, while maintaining government oversight of significant asset and liability transfers.
Advancing Digital Innovation
Budget 2026 continues to underscore the government’s commitment to support innovation in financial services. It proposes to “give new ideas and business models room to test products” and to “establish regulatory frameworks to facilitate innovative financial products and technologies”.
As detailed in our bulletin, Department of Finance Publishes Fintech Regulations, the government recently published regulations to operationalize the so-called “fintech amendments” to the Bank Act, the Insurance Companies Act and the Trust and Loan Companies Act, to provide federal institutions with flexibility to engage in a broad range of non-financial activities, either in-house or through subsidiaries, in support of innovation and productivity growth.
Consumer-driven banking is referenced several times in Budget 2026, with the government proposing to extend data portability beyond banking, including to telecommunications and air transportation. As outlined in our bulletins, Open Banking Milestone: Draft Consumer-Driven Banking Regulations Released and Open Banking Milestone: Draft Supervisory Guidelines for Consumer-Driven Banking Released, the government and Bank of Canada continue to advance the consumer-driven banking framework.
Budget 2026 noted the planned launch of the Real-Time Rail system by Payments Canada on November 9, 2026.
Building on previous measures, Budget 2026 proposes to:
- Launch the next phase of Canada’s payments modernisation, guided by a public consultation expected in early 2027 on future priorities and the statutory review of the Canadian Payments Act.
- Strengthen the Bank of Canada’s oversight of payment service providers through targeted amendments to the Retail Payment Activities Act.
- Work with provinces and territories to develop harmonised consumer protection requirements for payment service providers.
- Develop a pilot project for the use of voluntary digital credentials in financial services to support innovation and help combat identity fraud. The project would be developed by the Canadian Digital Service in collaboration with the Department of Finance Canada.
Following Budget 2025, the Stablecoin Act was enacted to regulate the issuance of stablecoins, and to bring stablecoin issuers under the oversight of the Bank of Canada. As detailed in our bulletin, Department of Finance Publishes Draft Stablecoin Regulations, there are ongoing consultations on the proposed regulations under the Stablecoin Act. Budget 2026 also announced the government’s intention to (1) require any financial institutions that issue stablecoins to do so through non-financial institution subsidiaries to be regulated under the Stablecoin Act; and (2) extend the Stablecoin Act to foreign financial institutions that are not prudentially regulated in Canada, to promote consistent regulatory treatment across stablecoin issuers.
There were some updates on other related measures announced in Budget 2025:
- The federal government is consulting on the National Anti-Fraud Strategy, with more information to be available in 2027. Budget 2026 proposes a legislated Multi-Sector Anti-Fraud Framework requiring organizations in the financial and telecommunications sectors and on digital platforms to prevent, detect, disrupt and respond to fraud and cooperate on complaints. It also proposes to amend the Bank Act to cap consumer liability at $0 for transactions resulting from unauthorized access to a consumer’s bank account, absent gross negligence.
- There are ongoing consultations on the Code of Conduct for the Prevention of Economic Abuse.
- The new Financial Crimes Agency is now expected to take the lead on complex financial crimes as of Spring 2027.
Housing and Mortgage Investment
Budget 2026 proposes raising the home price limit for optional mortgage insurance from $1 million to $1.5 million and permitting 30-year amortizations for these insured mortgages where at least one borrower is a first-time home buyer or the home is newly built. It also proposes consultations on transparency around insured mortgage prepayment penalties. The government proposes to amend the Canada Revenue Agency Act to provide the CRA with the authority to enter into agreements with mortgage lenders and insurers to provide an income verification service.
The Budget reiterates the changes to mortgage insurance rules in the Spring Economic Update 2026, intended to help unlock financing for "missing middle" homes. Changes include new mortgage insurance flexibilities for three- and four-unit homes, and permitting private mortgage insurers to offer mortgage loan insurance on five- to fifty-unit residential properties.
Other Measures
Budget 2026 also proposes a number of other measures, including:
- Transferring the responsibility for anti-money laundering and anti-terrorist financing supervision of federally regulated financial institutions from FINTRAC to OSFI.
- Canada’s first national sovereign-wealth fund, the Canada Strong Fund, will be funded in part through “Canada Strong Notes” to be made available through participating financial institutions.
- Providing the Minister of Finance with new authority to order the divestiture of investments held in Canadian businesses by banks, bank holding companies, and foreign banks and their affiliates to address national security risks, with a supporting information-gathering authority.
- Giving the Bank of Canada the ability to create a foreign currency portfolio to provide Emergency Lending Assistance in foreign currencies to banks facing extreme liquidity pressures.
- Changes to increase pricing transparency in the insured mortgage market and for the total banking fees charged annually by banks, to make it easier for Canadians to compare options, including through consumer-driven banking.
- Capital changes to the Insurance Companies Act to facilitate additional infrastructure investment by life insurers.
- Establishing the Canadian Earthquake Insurance Facility, financed through insurer levies, to provide up to $50 billion in emergency funding to the property and casualty insurance sector following an extreme earthquake.
- Legislating a periodic review of the CDIC deposit insurance framework every 10 years.
- Eliminating the ability of provincial trust and loan companies to become CDIC members, so that they may only do so by continuing as a federal trust and loan company.
- Changes to the federal Financial Consumer Protection Framework, including amendments to reflect FCAC’s role in complaints handling, confirm consumers' entitlement to redress where interest is unpaid or incorrectly credited, and streamline approval requirements for information-sharing agreements.
- Requiring banks to publish branch closure notices online and waive fees for closing or transferring affected accounts.
- Requiring banks to have processes in place to authenticate government-issued personal identification when opening accounts remotely, consistent with existing requirements for in-person account-opening.
- Building on existing non-sufficient funds fees caps of $10 by adding up to 50% more debit transactions to low- and no-cost bank accounts costing no more than $4 per month.
- Consulting on legislative amendments to require credit card payments above the minimum to be applied first to balances carrying the highest interest rate.
- Amending the payday lending exemption in the Criminal Code to require a minimum term of 42 days and repayment in instalments, and to prohibit credit insurance charges on payday loans.
- Amending the Financial Consumer Agency of Canada Act to clarify that the current maximum administrative monetary penalty applies where conduct began before the present maximum came into force but continued afterward.
- Strengthening OSFI’s administrative monetary penalties regime.
- Merging the Business Development Bank of Canada and Export Development Canada, together with various legislative amendments to streamline the delivery of federal financing.
