The 2024 Federal Budget targets three main areas related to financial services regulation: housing affordability; opportunities relating to digital innovation; and banking accessibility. It also includes various other measures that may be of interest to financial institutions.
Some of the most significant initiatives impacting financial services businesses are summarized in this bulletin.
Housing Affordability
As pre-announced, the 2024 Federal Budget includes proposed support for 30-year mortgage amortizations for insured first-time home buyers of newly built homes. It also increases the amount that first-time buyers can withdraw from their RRSP from $35,000 to $60,000, effective as of April 16, provided the related budget legislation is passed.
The 30-year amortization option will be added to the Canadian Mortgage Charter guideline, together with several expanded expectations – including that banks will use rent payment credit history to support mortgage applications, and that they will proactively contact mortgagors with additional information to help borrowers make informed decisions before renewals. The 2024 Federal Budget also references a forthcoming "Home Buyers' Bill of Rights".
The 2024 Federal Budget also has several targeted initiatives to support mortgage lending. The government is exploring Halal mortgages for Muslim Canadians, and promises more details in the Fall Economic Statement. It also plans to consult with the mortgage industry on making tools available through the Canada Revenue Agency (CRA) to support income verification and reduce mortgage fraud. In addition, legislative amendments to the National Housing Act are proposed to permanently increase the in-force limits for guarantees issued by the Canada Mortgage and Housing Corporation (CMHC) in respect of mortgage-backed securities and Canada Mortgage Bonds and for mortgage default insurance provided by CMHC from the temporary $750 billion to $800 billion.
Digital Innovation
The government reaffirmed its commitment to consumer-driven banking, also known as "Open Banking", as announced in the 2023 Fall Economic Statement. Additional background was released concurrently in a separate policy statement, Canada's Consumer Driven Banking Framework. The Financial Consumer Agency of Canada (FCAC) is being mandated to oversee the new framework, with funding also allocated to the Department of Finance to support this work with the implementation of a national security regime. For additional information regarding developments with respect to digital innovation and financial services, please refer to our bulletin Digital Innovation and Financial Services: What to Expect in 2024.
Payments Canada also announced on April 16 that it was resuming work on its Real-Time Rails project, which will facilitate the 24/7 exchange of payments and is necessary to support Open Banking objectives and fintech products.
Banking Accessibility
The 2024 Federal Budget references the ongoing work by the FCAC to establish criteria for fee-free bank accounts to support basic banking services. Although the 2024 Federal Budget does not announce firm legislation, it notes that the FCAC is in negotiations with banks to secure enhanced agreements to offer $0 per month and/or up to $4 per month fees for bank accounts that reflect modern banking trends, including more transactions.
The government also announced that it will release new non-sufficient fund (NSF) fee regulations in the coming months, intended to cap the NSF fees charged by banks to $10 per instance and prohibit fees for small overdrawn amounts under $10. They will also require banks to alert consumers that they are about to be charged an NSF fee, provide a grace period to deposit additional funds, and restrict multiple fees for the same transaction and the number of fees that may be charged in every 72-hour period.
Building on the changes announced in 2023 that committed to lowering the criminal rate of interest from the equivalent of 48 per cent APR to 35 per cent APR, the 2024 Federal Budget also announced additional Criminal Code amendments against offering or advertising credit at a criminal rate of interest, and simplifying the process to commence enforcement proceedings.
Other Measures
Although full details will not be available until budget legislation or other bills are tabled, the 2024 Federal Budget also proposes:
- amendments to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and related statutes to "strengthen the supervision, enforcement, and information-sharing tools" of Canada's Anti-Money Laundering and Anti-Terrorist Financing framework;
- a detailed review of the federal deposit insurance framework, with consultations beginning in 2024 to explore if any changes may be necessary;
- funding for Prosper Canada to expand community-delivered financial help services;
- extending the "sunset date" for legislative review of the Bank Act, Insurance Companies Act and Trust and Loan Companies Act to June 30, 2026, from the current date of June 30, 2025;
- requiring federally regulated financial institutions (FRFIs) to annually disclose the diversity of their boards of directors and senior management, similar to the diversity disclosure model in the Canada Business Corporations Act, plus changes to modernize how FRFIs can deliver governance documents to their shareholders; and
- regulations to prescribe data/labelling details required for customer account statements and online banking records concerning government payments accepted for deposit.
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