Canada Budget 2024: Next steps on open banking, pension fund investments
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Canada Budget 2024: Next steps on open banking, pension fund investments

Ottawa outlines next steps to encourage competitive open banking and pensions to keep more of their billions of dollars invested at home

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Businesses and wealthy Canadians will pay more taxes, but Canada's biggest banks and pension managers may be breathing a sigh of relief after reading Finance Minister Chrystia Freeland's latest federal budget, which aims to persuade for competitive “open” banking and pensions. Reveals next steps. Invest more of your billions at home.

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Perhaps the biggest relief for banks is the appointment of the Financial Consumer Agency of Canada to oversee open banking, which will see them compete with financial technology (FinTech) companies for customers on a range of products and services. Big banks are familiar with the FCAC through its role in promoting financial literacy and ensuring federally regulated institutions follow consumer-protection rules.

There was discussion about creating an entirely new government agency to oversee competitive open banking, as happened in the United Kingdom, but the Canadian Bankers Association wanted to use existing regulators to avoid duplicative or conflicting obligations from the federal government. Was insisting to do.

The bankers appear to have been successful in this regard. As well as selecting the FCAC in Tuesday's budget to “oversee, administer and implement” Canada's open banking framework, Ottawa also earmarked $1 million to prepare the consumer agency for its new responsibilities and develop a consumer awareness campaign. Determined dollars.

“Canadian banks have very good working relationships with many of their regulators,” said Geoff Rush, national industry leader for financial services at KPMG. “It's putting some additional responsibilities on the existing regulator, so I don't think you'll see any pushback or debate.”

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Rush said the FCAC's selection should accelerate the process of introducing open banking, making it easier for Canadians to transfer their financial data between banks and fintechs to promote competition.

“The FCAC is already up and running, so I think this will help bring open banking to Canadians faster,” he said.

Still, if banks are hoping to go slow on the path to greater competition, there is some hope given the document's stated goal of adopting legislation and the government's stated goal of fully implementing a governance framework for open banking. Fewer details have been provided than in. 2025.

“I think they've kicked the can down the road a little bit,” Rush said, adding that technical standards won't be clarified until late this spring and other details aren't expected until the fall economic update.

“The details I was expecting today about the scope and timing, the accreditation process and criteria and the general rules will be coming in their update later in the autumn of this year,” he said.

pension fund investment

Canada's largest pension funds were also given some relief in the budget after being blocked in the last economic update from including a plan for them to find ways to keep more of their globally invested funds in the domestic market. Can be found.

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The campaign gained momentum when dozens of CEOs from sectors ranging from telecommunications to energy signed an open letter to federal and provincial finance ministers calling for more pension money to be kept in Canada.

But despite fears that the federal government may be on its way to creating a dual mandate with national policy goals competing with the pursuit of the highest risk-adjusted returns, the only addition in Tuesday's budget went to former Bank of Canada Governor Stephen Poloz. Had to appoint. Chairing a new working group charged with “exploring greater opportunities for Canada's largest pension funds to promote economic growth domestically.” The working group is to be supported by Freeland.

The budget also mentions the possibility of investing in airport facilities, something Canadian pensioners have long expressed interest in acquiring in their home market as they have done abroad.

Michel Leduc, senior managing director and global head of public affairs for the Canada Pension Plan Investment Board, said he agreed with the approach laid out in the budget and Poloz's selection.

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“The quality of the process matters. “We feel like they have it right,” he said. “We look forward to making any contribution… that helps the cause.”

A key measure of success will be whether the process creates new and better opportunities for large pensions “at scale,” Leduc said, adding that some pension executives have lamented that the previous government's efforts to attract more money from institutional investors were ineffective. There was some lack of efforts.

The government's decision to focus on infrastructure, digital economy and artificial intelligence is good, he said, adding that the CPPIB will favor infrastructure projects that are large-scale and partially de-risked. The digital sector and AI, meanwhile, “are both smart signs for the future, especially when you think about (the fund's) exceptionally long horizon in deploying capital for future value.”

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Leduc said a key element pension funds will look at is whether investing in Canada poses less of a variety of risks than other markets.

“It's all about risk-adjusted returns,” he said.

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