Canada: 2019 Federal Budget: Financial Services Highlights

On March 19, 2019, the Government of Canada released its 2019 budget plan (2019 Budget) before the federal election later this year. The 2019 Budget includes several proposals that impact federally regulated financial institutions. The legislation implementing these proposals is not released yet and is expected to follow later in 2019. The key proposals are outlined below.


The government will continue assessing the merits of developing an open banking framework in Canada that will enable consumers and businesses to authorize third-party financial service providers to access their financial transaction data. The government announced its intention to study open banking in the 2018 federal budget. A four-person Advisory Committee on Open Banking was appointed later in September 2018 to lead a two-phase consultation. As part of the first phase, the Department of Finance released a consultation paper in early 2019, which is discussed in our January 2019 Blakes Bulletin: Canada Seeks Input on Open Banking Framework. The 2019 Budget notes that once the Advisory Committee receives the results of roundtable consultations that are currently underway, it will deliver a report to the Minister of Finance on the merits of open banking. We expect that the commentary will endorse moving forward with open banking in a way that does not compromise data security and consumers' control over their own information.


Following consultations in 2017, the government intends to introduce legislation to implement a new federal retail payments oversight framework (Retail Payments Oversight Framework). The Retail Payments Oversight Framework will require payment service providers to establish sound operational risk management practices and to protect users' funds against losses. This is a significant development in the Canadian payments landscape as service providers in the retail payments space are generally not regulated except in limited circumstances and, in any event, not from a safety and soundness perspective.

The Bank of Canada will be the regulatory authority monitoring compliance with the Retail Payments Oversight Framework and will maintain a public registry of regulated payment service providers. The choice of the Bank of Canada as the oversight authority for the new framework is interesting, given that it does not currently have oversight responsibilities, other than in respect of major clearing and settlement systems designated under the Payment Clearing and Settlement Act. We can expect that the Bank of Canada will pay particular attention to systemic issues, including risk.

For an overview of the 2017 consultation by the Department of Finance on the Retail Payments Oversight Framework, please see our July 2017 Blakes Bulletin: Department of Finance Proposes New Oversight Framework for Retail Payments.


The introduction of the Retail Payments Oversight Framework will also further the government's initiative to modernize the Canadian payments systems.

In 2018, Payments Canada released the Modernization Target State (Target State), which contemplates an overhaul of Canada's core payments clearing and settlement systems. Among other things, the Target State proposes to:

  • Replace the current Large Value Transfer System with a new system, Lynx
  • Introduce a new Settlement Optimization Engine (SOE), which will eventually replace the existing Automated Clearing Settlement System
  • Introduce a new real-time rail for immediate retail payments.

Later in 2018, the Department of Finance released a consultation paper on the review of the Canadian Payments Act. The consultation paper proposed creating a new class of associate membership that would be open to non-traditional payment service providers that are to be regulated under the proposed Retail Payments Oversight Framework. The associate members would become eligible to participate in exchange and settlement of payment items on the real-time rail (and possibly the SOE).

In February 2019, the Department of Finance released a Report on the Review of the Canadian Payments Act (Report) summarizing the feedback received on the consultation. The Report signalled that the government intends to move forward with associate membership for non-traditional payment service providers, but noted that any potential legislative amendments to the Canadian Payments Act would follow the implementation of the proposed Retail Payments Oversight Framework. This approach is also reflected in the proposals included in the 2019 Budget.

The February 2019 Report also notes that the government will develop specific proposals for consultation to address the incorporation of associate members into the governance structure of Payments Canada and any resulting modification to the liability framework for Payments Canada.


The 2019 Budget also includes several proposals impacting the Canadian anti-money laundering legislation. Specifically:

  • The government proposes to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) to modify the discretion of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) to make public information relating to administrative monetary penalties imposed by FINTRAC and the timing for making this information public. Under the current legislation, administrative monetary penalties may be made public at FINTRAC's discretion, based on criteria set out in FINTRAC's published guidelines, but only after all proceedings in respect of a violation are ended.
  • The government proposes to amend the Criminal Code to add an alternative "recklessness" requirement to the offence of money laundering. Under the current legislation, the offence of money laundering is subject to a "knowledge" requirement, which makes it challenging to secure convictions for that offence.
  • The government also proposes to create an Anti-Money Laundering Action, Coordination and Enforcement (ACE) Team, to ensure coordination and cooperation between law enforcement and intelligence agencies. In addition, a Trade Fraud and Trade-Based Money Laundering Centre of Expertise will be created to complement the activities of the ACE Team.
  • The 2019 Budget notes that more resources will be dedicated to FINTRAC. The new resources will partly be directed to overseeing virtual currencies, foreign money services businesses, and prepaid products under the proposed amendments to the PCMLTFA regulations published in 2018.
  • The government also intends to introduce amendments to the Canada Business Corporations Act (CBCA) to facilitate law enforcement's access to beneficial ownership information maintained by federally incorporated corporations. This follows the Budget Implementation Act, No. 2, which introduced amendments to the CBCA to improve the beneficial ownership recordkeeping requirements for business corporations. These amendments are set to come into force in June 2019. For more information, please see our November 2018 Blakes Bulletin: Beneficial Ownership: New Developments.


The 2019 Budget proposes amendments to federal financial institution statutes, including the Bank Act, the Insurance Companies Act, and the Trust and Loan Companies Act. The amendments aim to modernize the corporate governance framework for federally regulated financial institutions to reflect the changes made to the CBCA in May 2018. Among other things, the amendments will address participation in director elections and will expand voting options for members of federal credit unions.

The 2019 Budget also contemplates further changes to the bank resolution framework under the Canada Deposit Insurance Corporation Act and the Payment Clearing and Settlement Act, but no specific details of these proposed changes are provided.


The government intends to introduce amendments to the Bank Act and the Trust and Loan Companies Act to include foreign denominated accounts into the unclaimed property framework under federal financial institutions legislation, which currently applies to Canadian dollar deposits and cheques only.

More information about the proposals included in the 2019 Budget will be available once the government releases the implementing legislative amendments, which are expected later in 2019.

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© 2018 Blake, Cassels & Graydon LLP.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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