Budget 2025 and financial institutions: Key measures and opportunities

On November 4, the Canadian government presented its new budget for 2025 (Budget 2025)¹. This update aims to provide insight, albeit not exhaustive, on the many measures contained in Budget 2025 we believe are of interest to financial institutions doing business in Canada.

Proposed Budget 2025 changes impacting financial institutions

Unlocking Capital

The federal government is seeking to improve access to capital for Canadian companies to encourage economic growth, and Budget 2025 contains several measures aiming to unlock capital at financial institutions. 

Most importantly, Budget 2025 proposes to stimulate investment by insurers and financial institutions by repealing statutory limits on borrowing and portfolio investments, substituting them with more flexible guidance from the Office of the Superintendent of Financial Institutions (OSFI) as well as with targeted limits on such investments in commercial loans, real property and equity².

Additionally, the federal government has reached an agreement in principle with provinces and territories on a Financial Services chapter for the Canada Free Trade Agreement to foster an efficient and open Canadian financial sector. Concurrently, OSFI is consulting on easing capital requirements for smaller lenders, revising the treatment of certain loans, and adjusting rules for infrastructure investments.

Increasing Competition in the Banking Sector

Another aim of the federal government stated in Budget 2025 is to increase competition in the banking sector, which is meant to provide a wider variety of banking options, and ultimately lower costs for consumers. Budget 2025 thus outlines several measures aimed at enhancing competition in financial services while also ensuring consumer protection.

The federal government proposes legislative changes to support federal credit union growth (via amalgamation or asset acquisitions) and ease of access to the federal framework for provincial credit unions, such as by permitting them to continue their existing auto-leasing businesses permanently³. In addition, the 35% public holding equity threshold for financial institutions will be raised from $2 billion to $4 billion, allowing smaller players to grow without sacrificing their ownership structures⁴.

On the consumer protection side, by spring 2026, the federal government plans to publish draft regulations to ban investment and registered account transfer fees. Outside of more concrete measures to increase competition, the federal government also signalled its intention to promote greater transparency of cross-border transfer fees, to make it easier to switch primary chequing accounts to other Canadian banks, and to work with banks to develop a voluntary code of conduct with an eye on strengthening smaller institutions’ access to brokered deposit channels⁵.

Innovation and Competitiveness

Through Budget 2025, the federal government also seeks to continue fostering responsible innovation in the financial sector. To do so, Budget 2025 proposes to advance open banking by completing the Consumer-Driven Banking Act to allow for secure financial data sharing and introducing a data-mobility right under the Personal Information Protection and Electronic Documents Act (PIPEDA), enabling wider data sharing⁶. To further accelerate consumer-driven banking, legislation will be introduced to provide a legal framework for the ability to direct actions, such as switching accounts or making bill payments (also known as “write access”) by mid-2027.

Additionally, Budget 2025 earmarks additional funding for the Canadian Security Intelligence Service and Royal Canadian Mounted Police to implement national security safeguards in the Consumer-Driven Banking Act. The federal government further intends to hand oversight of the Consumer-Driven Banking Act to the Bank of Canada, given it currently monitors the activities of payment service providers. It also reaffirmed its support for the launch of Real-Time Rail, Canada’s new nation-building payments infrastructure, in 2026, which aims to make funds transit instantly between accounts and streamline the payment process. 

Budget 2025 also contemplates the introduction of a “notice-and-access” method of delivery of governance documents for financial institutions⁷. Owners will retain the right to request delivery by mail. This will be a welcome modification that facilitates shareholder communication and aligns with Canadian securities law. It remains to be seen how quickly these changes will be adopted, considering that the notice-and-access regime in the Canada Business Corporations Act introduced in 2018 still lacks enacting regulations.

Stablecoins

Budget 2025 also announced that it will amend the Retail Payment Activities Act to permit payment service providers (PSPs) to handle prescribed stablecoins, which would enable the regulation of PSPs that carry out payment functions using such stablecoins. This signals a deliberate move to bring stablecoin activity within the federal payments perimeter and to subject stablecoin issuers to prudential-style requirements.

The stablecoin framework proposes to incorporate payment functions involving certain stablecoins into the existing regulatory framework applicable to PSPs. The forthcoming legislation is also expected to include national security safeguards to ensure the integrity of the framework giving consumers and business confidence in the use of stablecoins.

It is also proposed that stablecoin issuers will be required to maintain adequate asset reserves, meet redemption obligations, and adopt governance and risk-management frameworks. In practice, this means that stablecoin issuers — many of which are currently technology companies — will be required to implement processes and controls in respect of liquidity management, capital adequacy, and operational resilience.

Until now, stablecoins have been primarily overseen by the Canadian Securities Administrators under securities law, leaving a fragmented regulatory landscape for stablecoins. Budget 2025 proposes a new, national framework that will be administered by the Bank of Canada. This approach aligns Canada with other jurisdictions, such as the US and UK, where central banks are taking a leading role in regulating stablecoins to ensure financial stability, consumer protection, and payment-system integrity. 

Combatting Financial Fraud

In the face of increasingly sophisticated fraudulent schemes targeting Canadians, Budget 2025 also contemplates burnishing Canadians’ trust in the safety and security of their financial systems by augmenting enforcement measures against financial fraud. 

As such, the federal government intends to develop a National Anti-Fraud Strategy uniting financial institutions, technology, and telecom companies to combat these increasingly complex fraud schemes. 

Furthermore, amendments to the Bank Act and the adoption of relevant regulations are also envisioned to allow consumers to, among other things, disable certain account features and set transaction limits, helping protect them from fraudulent actors. Further to these proposed amendments, banks will be required to implement policies and procedures and report data on consumer-targeted fraud to the Financial Consumer Agency of Canada, who will report the anonymized data to the minister of finance, allowing for more accurate and responsive policymaking to combat financial fraud going forward.

Ensuring Crime Doesn’t Pay

As a means of bolstering Bill C-12, the Strengthening Canada’s Immigration System and Borders Act which, among other things, provides measures aimed at tackling financial crime, Budget 2025 includes complementary measures to further protect Canadians against such threats. This includes amending the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its regulations to restrict large cash transactions of $10,000 or more and third-party cash deposits (wherein a person deposits cash into another person’s account), these being the most widespread cash-based forms of money laundering.

Budget 2025 also highlights this past February’s launch of the Integrated Money Laundering Intelligence Partnership (IMLIP) between financial institutions and Canadian law enforcement meant to enhance Canada’s response to complex money-laundering schemes. As a way of further strengthening IMLIP and help detect and deter money laundering, amendments to the PCMLTFA and PIPEDA are proposed to better outline public to private information sharing.

Strengthening Review of Foreign Bank Investments

To better protect Canadians, Budget 2025 announces the federal government’s plans to amend the Bank Act to allow reviewing certain types of investments in Canadian businesses by foreign banks and their affiliates for national security risks, which would also help align the financial sector with how other foreign investments in Canada are evaluated, such as under the Investment Canada Act⁸.

It is unclear whether this means that potential national security risk will simply be included as one of the factors to be considered by the Minister of Finance when conducting a public interest review or a full national security review regime will be incorporated into the Bank Act, with broader application than the current public interest review process. The government has indicated that targeted consultations will be held relative to these contemplated amendments.

Conclusion

While Budget 2025 proposes many concrete measures that will directly impact financial institutions, we are eager to see exactly how these measures will be implemented moving forward. This is especially true for the less concrete measures proposed in Budget 2025.

For instance, the federal government indicates it intends to foster greater predictability and transparency for stakeholders in federal financial sector consultations and to consult federally regulated property and casualty insurers to prepare the Canadian insurance sector for an extreme earthquake event. 

It also proposes introducing a voluntary Code of Conduct for the Prevention of Economic Abuse for federally regulated banks, meant to set clear expectations for how banks should deal with economic abuse. While these objectives are commendable, it remains to be seen how they will be achieved in practice, given the relatively vague information provided by the federal government on these points in Budget 2025.

This update is not meant to be exhaustive of all measures that could affect financial institutions carrying on business in Canada, and industry actors should therefore remain on the lookout for updates and announcements from the federal government as many of the measures, both proposed and intended, contained in Budget 2025 are implemented.

The authors would like to thank Nathan De Tracey, articling student, for his contribution to preparing this legal update.