2025 Federal Budget: Highlights Affecting Financial Services

The 2025 Federal Budget addresses four main areas related to financial services regulation: national investments to build productivity and housing supply; proposals to enhance financial sector competition; measures to combat financial crime; and, support for digital innovation. It also includes several other measures that may be of interest to financial service providers in banking, insurance and payments.

Investments in Nation Building Projects and Housing Supply

Canada has seen substantial economic change since its last budget. The United States is reshaping global trading relationships and the Budget states that "the impact of new tariffs and the uncertainty they have caused is expected to continue to build." To counteract their impact, the federal government proposes to invest heavily in "nation building" projects, new infrastructure, more defence spending, and to support housing affordability. The government unequivocally wants to advance these major investments with the support of the private sector.

The Budget proposes to "unlock capital" to "catalyse $500 billion in private investment over the next five years." It remains to be seen how much this will shift the regulatory framework around commercial lending and equity financing, although the Budget notes several recent Office of the Superintendent of Financial Institutions (OSFI) consultations and proposes to replace legislated limits on borrowing and portfolio investments with OSFI guidance. In July 2025, OSFI announced lower capital requirements for life insurers making investments in Canadian infrastructure through debt or equity.

As pre-announced, the Budget emphasized the creation of the new federal housing agency, Build Canada Homes, to attract investors and builders to expand the housing supply. It proposes to focus "primarily on non-market housing" and "help double the pace of constructions to build millions of more homes" by developing public land sites, "using cost-efficient and modern methods of construction, such as factory-built, modular and mass timber" and by supporting "bulk procurement and long-term financing". Build Canada Homes will also work to support urban, rural and northern Indigenous housing, with allocated funding.

There were not many additional details in the Budget about housing. To increase multi-unit home builds, the Budget proposes to increase the Canada Mortgage Bond annual issuance limit from $60 billion to $80 billion to help lenders finance this type of construction. Reflecting that housing construction is a provincial and municipal area, the government indicates it is working with other governments on additional policy measures.

Enhancing Financial System Competition

The Budget underscores the importance that the financial system plays in growing the Canadian economy and proposes to increase competition in the banking sector through multiple measures. To support new or smaller institutions, the government will adjust the public holding threshold from $2 billion to $4 billion, to allow institutions to start and grow larger before having to change their ownership structure. An Annex briefly references proposed amendments to the Bank Act¸ Insurance Companies Act and Trust and Loan Companies Act to "set out additional matters to consider in financial sector transaction approvals."

The government hopes to work with the largest banks to develop a voluntary code of conduct to strengthen smaller institutions' access to brokered deposits. However, the Budget also proposes supporting regulations under the Bank Act that would likely enforce the code's objective that brokered deposits not be unduly limited.

There are some specific proposals to reduce the cost of banking for Canadians, including proposed regulations to prohibit investment and registered account transfer fees. The government also intends to consult on improving transparency around cross-border transfer fees, including foreign exchange costs, and ways to simplify Canadians' ability to switch banks. Longer term, the Financial Consumer Agency of Canada (FCAC) is to prepare a report on "the structure, level and transparency of [bank] fees charged by Canadian banks".

At the same time, there may be substantial opportunities coming forward for provincial credit unions. The Budget notes that the government has concluded negotiations and has reached an agreement in principle with provinces and territories on a Financial Services chapter for the Canada Free Trade Agreement, which suggests that extra-provincial operations may become a possibility. It also proposes to amend legislation to make it easier for credit unions to enter the federal framework, including by allowing them to continue their existing auto leasing business, and to support federal credit unions' growth through amalgamations or asset acquisitions.

In support of broader competition, the Budget proposes to advance open banking by introducing legislation to complete the Consumer-Driven Banking Act and to shift its oversight from FCAC to the Bank of Canada, aligning with the Bank's oversight of payment service providers. The additional legislation is targeted for mid-2027 and is tied to Payments Canada's completion of the Real-Time Rail project in 2026 and its widespread use.

Combatting Financial Crimes

Also pre-announced, the 2025 Budget reiterated its proposal to launch a "national anti-fraud strategy" targeted at stronger protections for consumers, and a new Financial Crimes Agency that will take the lead on complex financial crimes by Spring 2026.

Funding is proposed for CSIS and the RCMP to support the build and oversight of national security safeguards in open banking, under proposed legislation for the Consumer-Driven Banking Act.

The Budget also proposes to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and its regulations to, among other things, restrict large cash transactions of $10,000 or more and the depositing of cash by one person to another person's account (i.e., third-party cash deposits). At a high level, goals are to strengthen Anti-Money Laundering/Anti-Terrorist Financing (AML/ATF) supervision, compliance, enforcement, and information sharing, including by better identifying the businesses and professionals with AML/ATF obligations, increasing penalties, and introducing a new compliance agreement framework.

Amendments to the Personal Information Protection and Electronic Documents Act are proposed to support the Integrated Money Laundering Intelligence partnership between law enforcement and Canada's big banks.

Amendments to the Bank Act are also proposed to enable the review of certain types of investments in Canadian businesses by foreign banks and their affiliates for national security risks. OSFI's authority to address integrity and security risks will be further expanded, together with a broader ability to receive and share information with federal government agencies and bodies, including adding the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) as a member of the Financial Institutions Supervisory Committee (FISC).

Digital Innovation

The 2025 Budget proposes new legislation to regulate the issuance of stablecoins, commonly tied to fiat currencies. It will require issuers to maintain and manage adequate asset reserves, establish redemption policies, and implement risk management frameworks. Amendments are proposed to the Retail Payment Activities Act to establish the Bank of Canada's oversight mandate.

Other Measures

The Budget also proposes a number of other measures including:

• requiring banks to provide public notice of branch closures on their website, with new restrictions on related fees to transfer or close accounts at the affected bank branch;
• amendments concerning bank processes to authenticate identification documents for opening a new account remotely;
• increasing immediate access to funds deposited by cheque, from $100 to $150;
• reducing the number of days a bank can place a hold on additional cheque funds, although its not specified on how many days banks will still be allowed to hold a cheque deposit before giving customers access to the funds;
• requiring banks to investigate and attempt to resolve fund transfers accidentally sent to the wrong recipient;
• introducing a voluntary Code of Conduct for the Prevention of Economic Abuse, outlining how banks can help identify, prevent and respond to economic abuse, such as "restricting access to money, sabotaging employment or forcing debt";
• consulting insurers and other interested stakeholders on ways to ensure the stability of Canada's insurance sector in extreme natural disaster events like earthquakes;
• amending the Bank Act¸ Insurance Companies Act and Trust and Loan Companies Act to allow for electronic delivery of governance documents, while retaining owners' rights to request delivery by mail; and
• extending the "sunset provision" in the Bank Act, Insurance Companies Act, and Trust and Loan Companies Act, which involves a comprehensive review of financial sector legislation, to June 30, 2033.

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