Canada Gazette, Part I, Volume 160, Number 42: Non-Financial Activities (Banks and Bank Holding Companies) Regulations

October 17, 2026

Statutory authority
Bank Act

Sponsoring department
Department of Finance

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the regulations.)

Issues

Canada’s financial sector is facing a period of digital transformation where advances in software, hardware, cloud computing, and artificial intelligence (AI) are changing how financial services are delivered. Traditional financial institutions must adapt to new technologies and shifting consumer preferences to remain competitive with disruptive and technologically sophisticated challengers.

Current financial sector legislation includes a number of restrictions on undertaking and investing in non-financial activities (NFA) such as information technologies or investments in financial technology companies (fintechs) that offer services beyond traditional financial services. These restrictions can hinder the ability of federally regulated financial institutions (FRFIs) to adopt and invest in new technologies that support their core financial services offerings. These restrictions can negatively affect innovation in Canada’s financial sector and limit capital investment by FRFIs in innovative sectors of the economy, both of which can impede overall productivity growth.

In Budget Implementation Act, 2018, No. 1, legislative amendments were made to provide greater flexibility for FRFIs to undertake non-financial activities, including financial technology activities. Regulations are necessary to operationalize the amendments by establishing the terms and conditions for the implementation of the amendments for over 400 FRFIs, including banks, federal credit unions, trust and loan companies, life insurers and property and casualty insurers.

Background

Current legislation

The business and investment powers of FRFIs are regulated under the federally regulated financial institutions statutes (the Bank Act, the Insurance Companies Act and the Trust and Loan Companies Act [the FRFI statutes]). In general, FRFIs are restricted from engaging in, or investing in entities that engage in, any activities other than the business of providing financial services. However, the FRFI statutes do permit FRFIs to undertake, either in house or through a subsidiary, certain non-financial activities related to information processing and technology, subject to ministerial approval if the activity takes place in Canada.

Limitations on non-financial commercial activities of FRFIs have been a long-standing feature of the federal financial sector’s legislative framework. The first Bank Act in 1871 included a prohibition on commercial activities, which was further extended to investments in 1967. This commercial-financial separation seeks to ensure that FRFIs remain primarily oriented towards financial services for prudential reasons and also to prevent financial sector control over other areas of the economy. This supports a sound and stable financial system and fair competition within the economy.

Over time, flexibility was incorporated into the federal financial sector’s legislative framework, as it was increasingly recognized that modern financial services depend on technology and information activities. In 1980, 1991 and 2001, the FRFI statutes were amended to permit specific non-financial technology or information processing activities, including owning and investing in companies that engage in these activities.

Since 2001, the FRFI statutes have permitted FRFIs to engage and invest in a range of technology and information processing activities. Under current rules, with the prior written approval of the Minister of Finance, a FRFI may develop, sell or otherwise deal with data transmission systems, information sites, communication devices or information platforms or portals that are used

In addition, a FRFI may engage in the following activities outside of Canada (without any approval required), or inside Canada (with the prior written approval of the Minister of Finance):

The same powers and restrictions apply to both in-house business activities and investments. This means that a FRFI may only invest in entities that exclusively conduct activities that the FRFI is permitted to engage in. FRFIs cannot invest in entities that conduct any non-permitted activities, even if the investment represents only a minority share of their business.

Legislative amendments

In 2018, Parliament enacted amendments to the FRFI statutes (the NFA Amendments) in the Budget Implementation Act, 2018, No. 1 to provide greater flexibility for FRFIs to undertake non-financial activities. Additional technical amendments were made in 2023 to correct a drafting error that, inadvertently, would have expanded the business and investment powers beyond the original policy intent. Specifically, the amendments allowed the following:

  1. Expand the scope of permitted non-financial activities by removing restrictions on the types of information that FRFIs may use when undertaking information processing and information technology activities, modernizing language that specified the types of information technology activities that are permitted, and creating a new permission to undertake any activity that relates to the provision of financial services by the FRFI.
  2. Remove requirements to seek prior Minister of Finance approval before engaging in, or investing in an entity that undertakes, permitted non-financial activities.
  3. Create a new category of permitted investments, which enables FRFIs to acquire a controlling or substantial investment in an entity that engages in non-permitted non-financial activities, but only where a majority of the entity’s overall business consists of financial service activities.
  4. Expand FRFIs ability to act as agents in respect of permitted non-financial activities and make referrals by expanding the referral power from permitting FRFIs to refer “any person to a financial service provider,” to allowing them to refer “any person to any person.”

The NFA Amendments are not yet in force, pending the adoption of regulations establishing the necessary terms and conditions governing their use.

Rationale for legislative amendments

The Department of Finance has heard concerns from stakeholders that current statutory limitations prevent or complicate investments by FRFIs in fintech firms, and restrict their ability to leverage technology and other commercial activities in-house, each of which may hamper their ability to innovate and serve the needs of Canadian consumers. These challenges have been exacerbated in recent years as financial services activities continue to migrate from in-person services to online and mobile applications. Furthermore, financial institutions increasingly compete with fintech and big tech competitors that operate outside the federal regulatory perimeter and have greater flexibility to offer their customers more useful products that blur the lines between financial and commercial services.

Impact of business and investment power expansion

Once the NFA Amendments are brought into force, there will be three paths through which FRFIs will be able to engage in non-financial activities without prior ministerial approval.

  1. Directly through business powers: FRFIs may conduct permitted non-financial activities in-house. These activities generally include information processing, information technology activities or activities that relate to the provision of financial services by the FRFI.
  2. Investing in a majority financial services entity (MFSE): FRFIs may invest in an entity with a majority of the entity’s revenues, asset value or aggregate value of operating expenses coming from financial activities, with the remainder being anything else.
  3. Through a subsidiary engaging in a permitted non-financial activity: FRFIs may invest in either another FRFI or another permitted investment entity that engages in at least one permitted non-financial activity.

Objective

The proposed regulations would provide flexibility for FRFIs to engage in a broad range of non-financial activities, either in house or through subsidiaries, supporting innovation and productivity growth. The proposed regulations would ensure that new powers are used in a measured and incremental way, potential risks are understood and mitigated over time, and key principles of the financial sector legislative framework, such as ensuring that FRFIs remain primarily oriented towards financial services, are maintained.

The proposed regulations would establish (1) limits and conditions on a FRFI’s use of the expanded business and investment powers to ensure FRFIs remain primarily oriented towards financial services; and (2) reporting requirements that ensure the Department of Finance has sufficient information to evaluate the policy outcomes and effectiveness of the business power expansion over time. The proposed regulations seek to find a balance between meeting these policy objectives and avoiding an excessive regulatory burden that may make it more difficult for small and medium-sized FRFIs to benefit from the new powers. Specifically, the objectives of the proposed regulations are to

  1. Provide flexibility for FRFIs to engage and invest in a wider scope of non-financial activities. The proposed regulations, together with the NFA Amendments, would provide the conditions for responsible innovation by permitting FRFIs to undertake and invest in a broader range of technology and non-financial commercial business opportunities. The intent would be to increase innovation in the financial sector and increase capital investment by FRFIs in innovative sectors of the economy. This flexibility can help the financial sector adapt to technological changes, which would help them compete with tech-savvy entrants, improve financial service offerings available to consumers, and contribute to higher productivity growth.
  2. Set limits on NFA business so FRFIs remain oriented towards financial services. The expanded business and investment powers would permit FRFIs to undertake a greater range of commercial (non-financial) activities. A key objective of the regulatory design is to ensure that there are regulatory limits in place to ensure that FRFIs remain primarily oriented towards financial services, as excess non-financial activities can lead to new forms of prudential risk that are challenging for financial sector regulators to supervise and the potential for unfair advantages for financial institutions competing in other sectors of the economy.
  3. Monitor FRFI use of NFA powers for policy purposes. The objective for the reporting requirements is to ensure the Department of Finance can determine how new business and investment powers are being used by FRFIs in order to proactively identify risks and support ongoing refinement of the regime. The reporting requirements are not intended to monitor compliance with the regime. The intent is to maintain the integrity of the framework (e.g. ensuring that activities are actually related to financial services and that caps/exposure regime are working as intended); provide timely information to the Minister of Finance on FRFIs’ NFA investments; and gather information on potential areas of policy concern (e.g. abuse of competitive position, consumer risks, and new risks that are hard for the Office of the Superintendent of Financial Institutions [OSFI] to supervise).
  4. Ensure small and medium-sized FRFIs can also benefit from the expanded business powers. The proposed regulations seek to ensure that limits and reporting requirements do not hinder the ability of small and medium-sized FRFIs to utilize the expanded business powers effectively, which would impede positive impacts on innovation and economic growth and harm small and medium-sized FRFIs’ ability to compete with larger FRFIs and big tech companies.

Description

The following four new sets of regulations are being proposed:

The four sets of regulations are substantively similar. Each proposed set of regulations would create conditions on the implementation of the NFA Amendments for collectively over 400 FRFIs who operate under their governing legislation. Specifically, these are banks, authorized foreign banks, federal credit unions, trust and loan companies, fraternal benefit societies, life insurers and property and casualty insurers.

Certain entities are not classified as FRFIs under this legislation but are subject to substantively similar conditions under the proposed regulations. These entities include bank holding companies, insurance holding companies, as well as certain foreign banks and entities associated with (or affiliates of) foreign banks. For simplicity, these entities are referred to as “FRFIs” in this notice.

Interpretation and definitions

The proposed regulations would set three definitions for activities and investments permitted by the NFA Amendments:

Non-financial activity: The NFA Amendments will expand the non-financial activities that FRFIs are able to undertake. For the purposes of these proposed regulations, non-financial activities will be defined as activities described under relevant legislative business power provisions related to information processing, dealing in information technology, and activities related to providing financial services. The main financial activities business of a FRFI is outside the scope of the proposed regulations and will continue to be subject to the existing rules.

Majority financial services entity: Once in force, the NFA Amendments will create a new permitted investment category where FRFIs can own entities with a majority of the entities’ revenues, asset value or aggregate value of operating expenses coming from financial activities (i.e. activities described under paragraphs 409(2)(a) to (d) of the Bank Act, paragraphs 440(2)(a) to (d) of the Insurance Companies Act, and paragraphs 409(2)(a) to (d) of the Trust and Loan Companies Act) with the remainder being anything else. The proposed regulations would define these entities as any entity that a FRFI, or any of its subsidiaries, may acquire, control or hold a substantial investment in, under relevant legislative provisions.

Entity engaging in non-financial activities: Existing financial subsidiaries owned by a FRFI would be permitted to engage in a broader range of non-financial activities once the NFA Amendments are in force. The proposed regulations would define these entities as any entity that engages in a non-financial activity and that is either a federal financial institution or an entity that a federal financial institution, bank holding company or insurance holding company may acquire, control or hold a substantial investment in under relevant legislative provisions.

For clarity purposes, when referring to all three definitions above, this statement may use the term “NFA business.”

Definition of “majority”

The NFA Amendments permit a FRFI to invest in a majority financial services entity, provided a “majority” of the business is financial services. The proposed regulations would define “majority” as meaning at least 60% of annual revenue, operating expenses or assets of the entity. This metric must be measured on a quarterly basis against the four most recent quarterly financial statements, or if quarterly financial statements are not prepared, the most recent annual financial statement.

This definition of “majority” seeks to find a balance between providing additional flexibility to FRFIs to invest in fintechs while ensuring there are adequate safeguards against these investments being used to conduct non-financial activities that would not otherwise be permitted if conducted by a FRFI directly. As a result, an additional 10% requirement above 50% is proposed to provide this safeguard and ensure that these entities’ primary business is financial activities. This higher threshold is balanced by flexibility in how FRFIs may calculate what percentage of the business is financial services. By allowing the majority to be calculated based on annual revenue, operating expenses or assets of the entity, the proposed regulations seek to accommodate different business models and different levels of business maturity.

Terms and conditions and circumstances

The proposed regulations set out certain conditions that FRFIs must meet in order to engage directly in non-financial activities or invest in entities engaging in a non-financial activity or a majority financial services entity.

There are two main conditions, which differ based on the size of the FRFI as determined by their equity.

Regulatory caps and limits on NFA business as a proportion of total business
Obligations for large FRFIs (with equity greater than $12 billion) to provide information about non-financial activities and investments

Small and medium-sized FRFIs (with equity of less than $12 billion) would be exempted from the reporting requirements to reduce the administrative burden that would be disproportionately costly to smaller FRFIs. The proposed regulations would require large FRFIs to submit information to the Department of Finance on the following: the business of subsidiaries that undertake NFA business (within 30 days of acquiring the subsidiary, and annually thereafter); the nature of all NFA business undertaken by the FRFI (directly or through a subsidiary); and the FRFI’s aggregate revenues from, and its exposure to, NFA business (annually). Submissions of information would be treated by the Department of Finance as confidential. The following reports would be required under the proposed regulations:

Restrictions on leasing

The proposed regulations would specify that FRFIs remain prohibited from providing temporary possession of personal property or movables, including motor vehicles, to customers in Canada for a purpose other than to finance the customer’s acquisition of the property or movables. This would ensure that existing restrictions in the FRFI statutes on leasing continue to apply.

Exemptions and clarifying amendments

FRFIs are already permitted to undertake a limited set of information technology and processing activities, subject to ministerial approval in most cases. The NFA Amendments would repeal and replace these permitted activities with a broader set of permissions, which would eliminate ministerial approval requirements.

The proposed regulations would not apply to activities for which the Minister of Finance has previously granted approval. This is because the process of ministerial approval already provided the Department of Finance with a line of sight into the business, along with parameters for carrying on the business. If the business changes or evolves such that it extends outside of what was previously approved, the FRFI would be required to apply the conditions of the proposed regulations to the unapproved portion of the business, including tracking, measuring, and reporting on it against the proportional limits.

The proposed regulations carry forward exemptions from the Information Processing Activities (Banks and Authorized Foreign Banks) Regulations. These exemptions are for specific activities that, over time, have been determined to be integral to the business of providing financial services. Examples include classifying and reporting payments, preparing an employer’s payroll, and accounting for the FRFI or a farmer. While not inherently financial services, these activities remain part of the proper functioning of traditional financial services, or are otherwise not considered the type of non-financial commercial technology or activity that merits additional regulatory scrutiny of the proposed regulations.

Transitional provisions

Not all current information technology and processing activities or investments require approval from the Minister of Finance (in addition to the information processing exemptions described above). These include activities outside of Canada that involve collecting, processing and transmitting information, as well as investments in entities whose business is limited to developing, designing, holding, managing, manufacturing, selling or otherwise dealing with any data transmission system, information site, communication device or information platform or portal that is used to provide information services, as prescribed in the Information Technology Activities Regulations.

The NFA Amendments repeal and replace the provisions permitting these activities. Accordingly, these activities that are carried out today would become NFA business and subject to the conditions of the proposed regulations. However, it may be difficult for FRFIs to immediately comply with the conditions of the proposed regulations for these activities, particularly around attributing and measuring the proportion of the business to the proportional limits. To account for this, the proposed regulations provide a transition period of two years to allow time for FRFIs to meet the conditions of the proposed regulations.

After the transitional period is over, a FRFI would have to meet the conditions of the proposed regulations in order to continue to engage or invest in the activity. This approach supports the Department of Finance’s objective to provide timely and comprehensive policy analysis, while also supporting regulatory integrity by limiting historical exemptions that would require tracking.

Repeal of existing regulations on information technology and information processing activities

The proposed regulations would repeal existing regulations that apply to the legislative provisions governing technology activities that would be repealed with the coming into force of the NFA Amendments. These regulations (1) prescribe additional purposes or circumstances where FRFIs may conduct or invest in information technology activities subject to ministerial approval; and (2) clarify that certain information processing activities are exempt from existing requirements for ministerial approval. The regulations that would be repealed are the following:

Regulatory development

Consultation

The proposed regulations stem from consultations that began in 2016 as part of the regular legislative review of the federal financial sector legislative framework. In 2016, a consultation paper sought views from stakeholders on how the financial sector’s legislative framework could be better positioned to respond to emerging trends and challenges. The Department of Finance held 32 meetings and received 63 written submissions from industry, regulators, and other advocacy groups.

Many stakeholders identified a need to adapt the legislative framework to better support financial innovation and technologies. In particular, stakeholders indicated that FRFIs face legislative obstacles that make it difficult for them to respond to rapidly changing customer demand and technological developments and enter into beneficial partnerships with fintechs.

In 2017, the Department of Finance released a second consultation paper seeking views on potential policy measures, which took into account the comments and recommendations received from stakeholders through the first consultation paper in 2016. In this paper, the Department of Finance proposed to clarify the types of information and technology activities that FRFIs would be permitted to undertake in-house, while maintaining the long-standing prohibition on commercial activities. In addition, the Department of Finance proposed measures on whether to provide FRFIs additional flexibility to make investments in non-financial activities, including financial technologies.

From the 2017 consultation, the Department of Finance received 300 submissions, of which 25 related to fintech. Many were submissions from incumbent financial institutions, or industry associations, with fewer being received from independent fintechs/venture capital. Those stakeholders providing more substantive and detailed input included the Canadian Bankers Association (CBA), the Canadian Health and Life Insurance Association (CHLIA), Portag3 Ventures, Ferst Capital, Yodlee, the Toronto Financial Services Alliance, the Competition Bureau, and Wildeboer Dellelce LLP. Broadly, stakeholders were supportive of a policy direction that better supports innovation in the financial sector, and offered support for enhanced powers and flexibility. These consultations informed the NFA Amendments.

Following royal assent of the NFA Amendments in June 2018, the Department of Finance began engagement with CBA, CLHIA, as well as the Office of the Superintendent of Financial Institutions (OSFI), on possible regulations. Among the elements discussed was how to delineate between technology activities contemplated under the NFA Amendments with other technology-based activities in a FRFI such as “core” financial services. This was noted as a serious technical challenge in implementing the NFA Amendments (particularly for in-house activities where business, assets and resources are intertwined). Also discussed was the need to maintain the current investment prohibitions (particularly the insurance-banking distinction), and the Department of Finance’s need for a line of sight into NFA business to support ongoing refinement of the regime calibrated based on how the new powers were being used.

In early 2019, officials began to engage on potential terms and conditions with a broader set of stakeholders. These conditions included the numerical limits based on revenue and regulatory capital, annual reporting, and various transaction-based conditions for investments. Stakeholders have been broadly supportive of the general approach, appreciating the flexibility built into the regulations, providing views on numerical limits, and understanding the need for the reporting conditions. Stakeholders engaged included the following:

Following these consultations, the regulatory drafting process began. In fall 2020, the Department of Finance began a technical review of the proposed approach to the proposed regulations with the CBA and the CLHIA. Industry groups identified a number of technical issues and expressed concern that the proposed regulations would disadvantage smaller FRFIs and would create a significant regulatory burden.

Additional consultations on a new regulatory draft were conducted in 2024, following a series of changes to address identified technical issues and create higher regulatory caps and limits for small and medium-sized FRFIs, as well as a streamlining of reporting requirements to reduce the excess burden. These changes were well received by industry stakeholders, though stakeholders indicated concern that the reporting requirements would still be relatively burdensome, particularly for smaller institutions. However, their overarching view was that, given the importance of increased business and investment power flexibility, the NFA Amendments should come into force as soon as feasible.

The proposed regulations include additional changes to exempt small and medium-sized FRFIs from reporting requirements, reflecting additional feedback received in 2024, as well as broader government initiatives to reduce the regulatory burden.

Throughout the legislative and regulatory drafting process, the Department of Finance has consulted with its federal financial regulatory agency partners — the Office of the Superintendent of Financial Institutions (OSFI), the Financial Consumer Agency of Canada (FCAC), the Bank of Canada, and the Canadian Deposit Insurance Corporation (CDIC). These partners have helped identify and resolve ancillary policy issues related to expanding business and investment powers. OSFI in particular has played a critical role in supporting the development of the proposed regulations. As administrators of the FRFI statutes, OSFI supports the implementation of regulations in terms of prudential policy and oversight. Officials of the Department of Finance consulted extensively with OSFI between 2018 and present, to obtain their expertise on appropriate and effective regulatory design. This collaboration included support by OSFI’s supervision group, and experts in insurance, capital, and small and-medium sized banks.

Indigenous engagement, consultation and modern treaty obligations

Following the completion of the assessment of modern treaty implications, no adverse impacts on potential or established Indigenous or treaty rights, which are recognized and affirmed in section 35 of the Constitution Act, 1982, were identified.

Instrument choice

Non-regulatory options have not been considered because the NFA Amendments to the FRFI statutes require the terms and conditions to be prescribed by regulations.

Regulatory analysis

Baseline scenario

Under current business power and investment rules, FRFIs are generally required to receive ministerial approval prior to undertaking certain specified information technology and processing activities in Canada. Despite legislative changes to remove ministerial requirements and expand the types of permitted non-financial activities and investments, FRFIs cannot yet benefit from these expanded business and investment powers pending the adoption of the proposed regulations.

As a result, while the burden reduction associated with bringing into force the NFA Amendments is out of scope for this regulatory impact analysis, under the baseline scenario, FRFIs face administrative, compliance and opportunity costs associated with ministerial approval requirements and prescriptive definitions of permitted non-financial activities. These rules can prevent or complicate investments by FRFIs in financial technology firms and restrict their ability to leverage technology and other commercial activities that complement their financial services offerings. As a result, these restrictions can hamper their ability to innovate, adopt new technologies, and improve the financial services they offer to Canadians.

Regulatory scenario

These regulations are permissive in nature in that they allow FRFIs to more easily undertake, under certain conditions, activities that otherwise would not be allowed in the baseline. The costs and benefits of the proposed regulations therefore depend on how many FRFIs will choose to take advantage of the expanded business and investment powers and subject themselves to the terms and conditions imposed by the proposed regulations.

To estimate the minimum number of FRFIs that might engage in NFA business, the Department of Finance relied upon its history of supporting ministerial approvals. Over the past 20 years, an average of three to four FRFIs have sought approval each year. Of these requests for approvals, two to three were for activities related to investments, with the others being requests for business (in-house) operations. Over the past 10 years, approximately one FRFI per year has sought approval.

The Department of Finance assumes that more FRFIs will engage in NFA business than the baseline scenario due to a faster, less costly and more certain process, an expanded scope of permitted activities and investments, and an increasing competitive pressure to adapt to technological changes in the financial sector.

Specifically, the Department of Finance assumes that all large FRFIs will undertake some form of NFA business each year and will therefore be required to submit an annual report. The Department also assumes that, on average, large banks will conduct two NFA investments per year, and large insurers will conduct one NFA investment per year, requiring them to submit a transaction report. While there is a higher degree of uncertainty about how smaller FRFIs will seek to use the new powers, the Department of Finance conservatively estimates that 25% of small and medium-sized banks, 10% of small and medium-sized insurers, 10% of trust and loan companies, and 10% of foreign banks operating in Canada will conduct some form of NFA business each year.

Benefits

The key difference between the baseline and regulatory scenarios is that FRFIs would gain increased flexibility to engage and invest in a broader range of non-financial activities.

The main incremental benefit would be that increased flexibility would help FRFIs develop, adopt and invest in new technologies that improve the quality of the services they offer to Canadians. This would help the financial system adapt to an emerging competitive landscape where technological capabilities are paramount, and consumers demand financial products and services that leverage technology and help them manage a greater range of issues. There would also be incremental benefits by providing a new source of capital investment for innovative sectors of the economy. Collectively, these impacts would have positive impacts on innovation and productivity growth in Canada.

Costs

Relative to the baseline scenario, the main cost of the proposed regulations would be administrative costs associated with reporting requirements and compliance costs associated with developing a methodology to track the cumulative amount of NFA business to ensure FRFIs remain within regulatory limits. The requirements to provide transaction and annual reports would only apply to large FRFIs that choose to undertake NFA business, while the costs associated with developing a methodology and tracking overall NFA business would apply to all FRFIs that choose to undertake NFA business. This costing analysis does not factor in cost savings associated with the NFA Amendments removing ministerial approval requirements relative to the legislative baseline.

The Department of Finance estimates that the proposed regulations would result in annualized administrative and compliance costs of $267,518. Over a 10-year time period, the present value costs of the proposed regulations are expected to total $1,878,936 in 2025 Canadian dollars, with 2026 as the present value base year.

Broken down across the four proposed regulatory titles, the costs include the following:

For the basis of these cost estimates, after validation with industry associations, the Department of Finance assumes that 75 hours of incremental work would be required for the preparation of each annual report, 100 hours for each transaction report, and 75 hours annually for aggregate limit methodology and tracking. All labour costs utilized the average wage for the Professional Occupations in Finance of the National Occupation Classification (NOC), which is assessed at $48.03 per hour, with a 25% internal overhead adjustment. The Department of Finance will utilize existing resources to monitor investment and annual reports, resulting in minimal incremental costs.

Small business lens

Analysis under the small business lens concluded that the proposed regulations would not impact small businesses. Even if FRFIs are not considered small businesses due to their size, the proposed regulations would include provisions designed to help small FRFIs (equity below $4 billion) and medium-sized FRFIs (equity between $4 billion and $12 billion) take advantage of the business and investment power expansions. These proposed measures are a response to feedback from stakeholders on initial regulatory drafts where regulatory treatment was identical for all FRFIs, regardless of size.

These proposed measures include a higher NFA business revenue limit of 15% for small and medium-sized FRFIs, as well as an exemption from reporting requirements. These measures seek to ensure that the overall level of burden introduced (e.g. costs associated with complying with regulatory caps) is properly calibrated for smaller FRFIs to ensure they can remain competitive with larger FRFIs and take advantage of the new business powers while also ensuring they remain primarily financial in orientation.

One-for-one rule

The one-for-one rule applies, since there is an incremental increase in the administrative burden on business. The proposal is considered burden IN under the rule, as the proposed regulations would create four new regulatory titles and repeal nine regulatory titles (resulting in five fewer regulatory titles).

There would be an increase in the administrative burden due to the administrative requirements of the proposed regulations on large FRFIs to prepare and submit reports to the Department of Finance.

The four proposed regulatory titles would result in total annualized administrative costs of $16,820, represented as follows:

As per the Red Tape Reduction Regulations, the assessment of administrative impacts was conducted for a period of 10 years commencing from registration. All values listed in this section are presented in 2012 dollars, discounted to 2012 at a rate of 7%.

While not directly related to the proposed regulations, bringing into force the NFA Amendments would decrease the administrative burden on FRFIs, as it would remove ministerial approval requirements, which can entail significant administrative and compliance costs.

Regulatory cooperation and alignment

The proposed regulations would only apply to FRFIs incorporated under the FRFI statutes. Financial institutions or entities incorporated under a provincial statute are subject to province-specific regulatory regimes. The NFA Amendments and proposed regulations would not prevent provincially regulated financial institutions from engaging in their own NFA business, subject to their business and investment powers under relevant provincial law.

The proposed regulations are part of the broader financial sector framework. The Department of Finance and partner agencies (OSFI, the Canada Deposit Insurance Corporation, the Financial Consumer Agency of Canada, and the Bank of Canada) continuously work to ensure this framework is aligned with the work of the international organizations, such as the International Association of Insurance Supervisors, the Financial Action Task Force, the International Monetary Fund, and the Financial Stability Board. The Department of Finance has not identified any aspects of the regulatory proposal that would impede the alignment of the federal financial framework with the work of these international organizations. The proposed regulations would align with recommendations from international standard-setting bodies such as the G20, the Financial Stability Board, and the International Monetary Fund to develop regulatory frameworks that embrace responsible innovation in the financial sector, while monitoring and responding to risks in a proportionate way.

The proposed regulations are not the result of any free trade agreement commitment and are not expected to conflict with Canada’s obligations under international trade agreements nor efforts to align Canada’s federal financial sector legislative framework with the work of the standard-setting bodies or regulatory cooperation forums.

Effects on the environment

In accordance with the Cabinet Directive on Strategic Environmental and Economic Assessment, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

The proposed regulations are not expected to have any disproportionate gender or diversity impacts.

Implementation, compliance and enforcement, and service standards

Implementation

A separate order in council will be required to bring into force the NFA Amendments, including the regulation-making authorities. The proposed regulations would come into force on the day that the NFA Amendments would come into force, but if they are registered after that day, they come into force on the day on which they are registered. The NFA Amendments will come into force on a day or days to be fixed by order of the Governor in Council. A decision on timing would be made following Part I consultation and subject to views from respondents.

Once the proposed regulations and NFA Amendments come into force, FRFIs would be able to utilize the business and investment powers of the NFA Amendments, subject to meeting the terms and conditions of the proposed regulations, except where an exemption applies.

The NFA Amendments will repeal and replace current permissions, which includes removing a ministerial approval requirement for any information technology activities or investments, as well as for information processing activities in Canada.

For FRFIs that received ministerial approval for information technology or processing activities, they may carry out that activity without complying with the conditions of the proposed regulations, provided the business remains within the scope of that approval (including any undertakings or attestations). If the business changes or evolves such that it extends outside of what was previously approved, the FRFI would be required to apply the conditions of the proposed regulations to the unapproved portion of the business, including tracking, measuring and reporting on it against the proportional limits.

Activities and investments that did not require ministerial approval (information processing activities operated outside Canada and certain prescribed information technology activities described in the Information Technology Activities Regulations) would be temporarily exempted from the proposed regulations for a two-year period. After this two-year transitional period, these activities would be categorized as NFA business, and FRFIs would be required to meet the terms and conditions of the proposed regulations.

Before a FRFI engages in NFA business, the FRFI must develop a methodology for categorizing and attributing NFA business revenue and capital exposure associated with the limit conditions. Each year, large FRFIs would be required to provide the Department of Finance with a description of this methodology and of the calculations they performed to comply with the regulatory limits and caps.

The Department of Finance would notify large FRFIs, through their industry association and through OSFI, which officials of the Department of Finance have authority to receive reports. The information received from the reports will be used to support ongoing monitoring and refinement of the regime over time. Information will be treated as confidential. Certain information directly related to the supervision of FRFIs may be shared with member agencies of the Financial Institutions Supervisory Committee (FISC). Any information shared through FISC would be subject to existing confidentiality and information-sharing protections that apply to all information shared through FISC.

Compliance and enforcement

The proposed regulations would become part of the broader financial sector legislation framework, as well as the federal laws of general application such as the Competition Act that also apply to FRFIs. The proposed regulations would align with these existing compliance and enforcement responsibilities.

Department of Finance: The Department of Finance would receive transaction and annual reports and would use these reports for policy analysis purposes and to support ongoing refinement of the regime.

Office of the Superintendent of Financial Institutions (OSFI): OSFI is the prudential regulator of FRFIs and administers the prudential regulatory framework that applies to them. In cases where FRFIs are not complying with statutory or regulatory requirements, including rules around business powers and investments, OSFI can take, or require the management or board to take, the necessary corrective measures.

Financial Consumer Agency of Canada (FCAC): FCAC is responsible for protecting the rights and interests of consumers of financial products and services. FCAC promotes, monitors and enforces the compliance of banks and other federally regulated financial entities with consumer protection measures. It monitors compliance with market conduct obligations under federal legislation and regulations, codes of conduct and public commitments, including the Bank Act’s Financial Consumer Protection Framework. In addition to existing provincial consumer protection laws covering non-financial products and services, consumers of non-financial products or services offered by banks and their affiliates would benefit from an additional layer of consumer protection from the Bank Act’s Financial Consumer Protection Framework, including rules and requirements related to responsible business conduct, complaints handling, disclosure and transparency, whistleblowing, and consumer redress.

Competition Bureau: The Competition Bureau is responsible for the administration and enforcement of the Competition Act. Under the Competition Act, the Commissioner of Competition has the authority to review any merger or acquisition to determine whether it is likely to result in a substantial lessening or prevention of competition in Canada. The Competition Bureau will continue to exercise its enforcement powers to review mergers and acquisitions by FRFIs and their overall compliance with the Competition Act, including acquisitions of control or substantial investments by FRFIs that may occur as a result of the proposed regulations.

Consequences of non-compliance

It is the responsibility of FRFIs to ensure that their business activities and investments comply with the various rules of the business powers and investment regime in the FRFI statutes. OSFI has a number of supervisory tools at its disposal if FRFIs are not complying with business power restrictions and investment limits.

If a FRFI’s investments in an entity engaging in a non-financial activity or in a majority financial services entity cause the FRFI to breach either of the regulatory limits (revenue or capital), the proposed regulations would require the FRFI to reclassify all NFA investments as temporary investments. During the two-year time span when FRFIs may hold a temporary investment, the FRFI would have to decide which investments to reclassify as permitted investments that meet the terms and conditions of the proposed regulations. Investments that cannot satisfy the conditions of the proposed regulations would remain temporary investments, and the FRFI may be required to divest or seek to categorize it under a different investment permission.

If a FRFI invests in a majority financial services entity and the entity were to breach the definition of “majority” by engaging in less than the required proportion of financial services, the proposed regulations would constitute this as a change in business in the entity and automatically deem it to be a temporary investment.

Contact

David Tousignant
Director General
Financial Institutions Division
Financial Sector Policy Branch
Department of Finance
90 Elgin Street
Ottawa, Ontario
K1A 0G5
Email: David.Tousignant@fin.gc.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council proposes to make the annexed Non-Financial Activities (Banks and Bank Holding Companies) Regulations under subsections 410(3)footnote a, 416(3) and 468(2.2)footnote b, sections 468.1footnote c and 474footnote d, subsections 539(3)footnote e and 930(2.2)footnote f, sections 930.1footnote g and 936footnote h and subsection 978(1)footnote i of the Bank Actfootnote j.

Interested persons may make representations concerning the proposed Regulations within 30 days after the date of publication of this notice. They are strongly encouraged to use the online commenting feature that is available on the Canada Gazette website but if they use email, mail or any other means, the representations should cite the Canada Gazette, Part I, and the date of publication of this notice, and be sent to David Tousignant, Director General, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance, 90 Elgin Street, Ottawa, Ontario K1A 0G5 (email: David.Tousignant@fin.gc.ca).

Ottawa, October 9, 2026

Janna Rinaldi
Assistant Clerk of the Privy Council

Non-Financial Activities (Banks and Bank Holding Companies) Regulations

Interpretation

Definitions

1 The following definitions apply in these Regulations.

Act
means the Bank Act. (Loi)
entity engaging in non-financial activities
means any entity that engages in a non-financial activity and that is either a federal financial institution or an entity that a federal financial institution, bank holding company or insurance holding company may acquire or hold control of, or acquire, hold or increase a substantial investment in, under any of subsections 468(2) and 930(2) of the Act, subsection 453(2) of the Trust and Loan Companies Act and subsections 495(2) and (4), 554(2) and 971(2) of the Insurance Companies Act. It does not include an entity of which control, or in which a substantial investment, is acquired under any other provision of the Act, the Trust and Loan Companies Act or the Insurance Companies Act. (entité exerçant des activités non financières)
majority financial services entity
means any entity that a bank or bank holding company, or any of its subsidiaries, may acquire or hold control of, or acquire, hold or increase a substantial investment in, under any of subsections 468(2.1) and 930(2.1) of the Act, subsection 453(2.1) of the Trust and Loan Companies Act and subsections 495(2.1) and (4.1), 554(2.1) and 971(2.1) of the Insurance Companies Act. It does not include an entity in which control or a substantial investment is acquired under any other provision of the Act, the Trust and Loan Companies Act or the Insurance Companies Act. (entité s’occupant en majeure partie de services financiers)
non-financial activity
means any activity that a bank is permitted to engage in under paragraph 410(1)(b.1) or (c) of the Act. (activité non financière)

Definition of majority

2 (1) For the purposes of subsection 468(2.1) of the Act, majority means a proportion of 60% or more, determined in accordance with subsection (2).

Determination of proportion

(2) The proportion of an entity’s business that consists of activities that a bank is permitted to engage in under any of paragraphs 409(2)(a) to (d) of the Act is equal to whichever of the following proportions is the greatest:

Quarterly or annual financial statements

(3) The amounts and values referred to in subsection (2) must be calculated based on the amounts and values reported by the entity in its four most recent quarterly financial statements or, if the entity does not prepare quarterly financial statements, its most recent annual financial statement.

Conditions and Circumstances

Non-financial activity

3 For the purposes of paragraphs 410(1)(b.1) and (c) of the Act, a bank must not engage in a non-financial activity except subject to the conditions and in the circumstances that are set out in sections 5 to 12.

Control or substantial investment

4 For the purposes of subsections 468(2) and (2.1) and 930(2) and (2.1) of the Act, a bank or bank holding company must not acquire or hold control of, or acquire, hold or increase a substantial investment in, a majority financial services entity or an entity engaging in non-financial activities except subject to the conditions and in the circumstances that are set out in sections 5 to 12.

Equity — less than $12 billion

5 (1) A bank or bank holding company that has equity of less than $12 billion must ensure that the sum of the following amounts does not exceed, at the end of each financial year, 15% of the value of its annual revenue:

Equity — $12 billion or more

(2) A bank or bank holding company that has equity of $12 billion or more must ensure that the sum of the amounts referred to in paragraphs (1)(a) to (c) does not exceed, at the end of each financial year, 10% of the value of its annual revenue.

Annual revenue

(3) For the purposes of subsections (1) and (2), the value of the bank or bank holding company’s annual revenue is, at its election, either the amount of its annual revenue as reported on a consolidated basis in its most recent annual financial statement or the average amount of its annual revenue as reported on a consolidated basis in its annual financial statements for the three most recent financial years.

Regulatory capital

6 (1) A bank or bank holding company must ensure that the sum of the following values does not exceed, at any time, 10% of the value of its regulatory capital:

Definition of value

(2) For the purposes of paragraphs (1)(a) to (c), value means

Obligation to provide information

7 A bank or bank holding company that has equity of $12 billion or more must provide to the Deputy Minister of Finance, or any officer of the Department of Finance authorized in writing by the Deputy Minister of Finance,

Confidential information

8 (1) All information provided under section 7, and all information prepared from that information, is confidential and must be treated accordingly.

Clarification

(2) A bank or bank holding company is not required to provide information under section 7 if

Prohibited business

9 (1) A bank must not engage in a business that includes providing temporary possession of personal property or movables, including motor vehicles, to customers in Canada for a purpose other than to finance the customer’s acquisition of the property or movables.

Control and substantial investment

(2) A bank or bank holding company must not acquire or hold control of, or acquire, hold or increase a substantial investment in, a majority financial services entity or an entity engaging in non-financial activities if the business of that entity includes providing temporary possession of personal property or movables, including motor vehicles, to customers in Canada for a purpose other than to finance the customer’s acquisition of the property or movables.

Requirements of section 5 or 6

10 If a bank or bank holding company holds control of, or a substantial investment in, a majority financial services entity or an entity engaging in non-financial activities and if any of the requirements set out in sections 5 and 6, as applicable, are not met, the bank or bank holding company is deemed to have acquired, with respect to every such entity, a temporary investment in respect of which section 471 or 933 of the Act applies, as the case may be.

Majority financial services entity

11 If a bank or bank holding company holds controls of, or a substantial investment in, a majority financial services entity and that entity ceases to be a majority financial services entity because the majority of that entity’s business no longer consists of the activities that a bank is permitted to engage in under any of paragraphs 409(2)(a) to (d) of the Act, the bank or bank holding company is deemed to have acquired, with respect to that entity, a temporary investment in respect of which section 471 or 933 of the Act applies, as the case may be.

Financial statement — preparation

12 Any financial statement referred to in these Regulations must be prepared in accordance with generally accepted accounting principles in Canada or, if it is prepared in respect of an entity that is not a Canadian entity, in accordance with generally accepted accounting principles in

Exemptions

Activities approved by Minister

13 A bank is not required to take into account — in making the calculations under sections 5 and 6 or providing the information required under section 7 — any non-financial activity that is carried out by the bank, or by any entity that it holds control of, or a substantial investment in, within the scope of

Exempted activities

14 (1) A bank is not required to take into account — in making the calculations under sections 5 and 6 or providing the information required under section 7 — any non-financial activity that the bank, or any subsidiary that is a bank, carries out in any of the following circumstances:

Request for information

(2) A bank that carries on, in Canada, a non-financial activity in the circumstances referred to in subsection (1) must, at the request of a client and on the payment of a reasonable fee, make available to the client — within a reasonable time after the request — any information concerning the business of the client that is acquired in the course of carrying on the activity. The information must be provided in print or machine-readable form, at the option of the client.

Transitional Provision

Exempted activities — two years

15 During a period of two years that begins on the day on which these Regulations come into force, a bank or bank holding company is not required to take into account — in making the calculations under sections 5 and 6 or providing the information required under section 7 — any activity

Consequential Amendment to the Exemption from Restrictions on Investments (Banks, Bank Holding Companies and Foreign Banks) Regulations

16 Section 1 of the Exemption from Restrictions on Investments (Banks, Bank Holding Companies and Foreign Banks) Regulations footnote 2 is replaced by the following:

Prescribed circumstances

1 For the purposes of subparagraphs 468(3)(d)(ii) and 930(3)(d)(ii) of the Bank Act, subsections 468(4) to (6) of that Act do not apply in determining whether a bank would be permitted to acquire a substantial investment in an entity under subsection 466(2), paragraph 466(3)(b) or (c) or subsection 466(4) or 468(1), (2) or (2.1) of that Act.

Repeals

17 The following Regulations are repealed:

Coming into Force

S.C. 2018, c. 12

18 These Regulations come into force on the day on which section 319 of the Budget Implementation Act, 2018, No. 1 comes into force, but if they are registered after that day, they come into force on the day on which they are registered.

Terms of use and Privacy notice

Terms of use

It is your responsibility to ensure that the comments you provide do not:

  • contain personal information
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The federal institution managing the proposed regulatory change retains the right to review and remove personal information, hate speech, or other information deemed inappropriate for public posting as listed above.

Confidential Business Information should only be posted in the specific Confidential Business Information text box. In general, Confidential Business Information includes information that (i) is not publicly available, (ii) is treated in a confidential manner by the person to whose business the information relates, and (iii) has actual or potential economic value to the person or their competitors because it is not publicly available and whose disclosure would result in financial loss to the person or a material gain to their competitors. Comments that you provide in the Confidential Business Information section that satisfy this description will not be made publicly available. The federal institution managing the proposed regulatory change retains the right to post the comment publicly if it is not deemed to be Confidential Business Information.

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Comments will remain posted on the Canada Gazette website for at least 10 years.

Please note that communication by email is not secure, if the attachment you wish to send contains sensitive information, please contact the departmental email to discuss ways in which you can transmit sensitive information.

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The information you provide is collected under the authority of the Financial Administration Act, the Department of Public Works and Government Services Act, the Canada–United States–Mexico Agreement Implementation Act,and applicable regulators’ enabling statutes for the purpose of collecting comments related to the proposed regulatory changes. Your comments and documents are collected for the purpose of increasing transparency in the regulatory process and making Government more accessible to Canadians.

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The personal information provided is included in Personal Information Bank PSU 938 Outreach Activities. Individuals requesting access to their personal information under the Privacy Act should submit their request to the appropriate regulator with sufficient information for that federal institution to retrieve their personal information. For individuals who choose to submit comments anonymously, requests for their information may not be reasonably retrievable by the government institution.