Brokers await regulations on bank fintech changes

As the federal government drafts regulations related to recent Bank Act amendments, the Insurance Brokers Association of Canada (IBAC) is confident that the fundamental aspects of their position have been upheld.

Bill C-74, which received royal assent in June 2018, proposed amendments to the Bank Act to give banks additional powers regarding the ability to own fintechs and have dealings with fintechs. The federal government is currently drafting the regulations and they are expected to be released in the “next number of months,” IBAC chief executive officer Peter Braid told Canadian Underwriter Wednesday.

IBAC’s position on the issue was two-fold:

• The federal government maintain its important policy commitment to keep the pillars of banking and insurance separate
• The prohibition in Section 416 of the Bank Act preventing banks from selling insurance at the point of granting credit must be continued

“We were very pleased with the outcome and with the strong signals that we received from Finance Canada with respect to IBAC’s position being completely upheld,” Braid said. “[The Department of] Finance Canada has also committed to us that the current blanket provisions in the Bank Act and the regulation prevent banks from sharing customer information either directly or indirectly with their insurance operations.”

When the proposed amendments were initially announced, concerns were raised that banks could share their information with unregulated fintechs, who could pass along the bank’s information to an insurance company (whether owned by the bank or not).

“I don’t think it’s entirely accurate to say fintechs are completely unregulated,” Braid said. “If a bank owns a fintech or has a relationship with the fintech, that bank is responsible and accountable under the Bank Act and [Office of the Superintendent of Financial Institutions] regulations for the actions of the fintech. So, the bank even though it has a relationship with the fintech is ultimately accountable for the fintech’s activities.”

From a privacy perspective, Braid said it’s important for privacy legislation related to banks stay up-to-date with “quickly evolving and emerging technology.” The House of Commons’ Standing Committee on Access to Information, Privacy and Ethics has been studying the issue and has made recommendations with respect to enhancements to privacy legislation in the context of evolving technology. Braid said it’s too early to say what evolving technology they are looking at, but IBAC supports those efforts.

“IBAC will continue to work very strongly to ensure that as technology continues to evolve, those important policy commitments on the part of the government to maintain the separation of the pillars of banking and insurance and uphold Section 416 of the bank act are not eroded.”

He added that IBAC was invited by the Department of Finance in January to a pre-regulation drafting consultation and “we’ll be monitoring the release of the regulations closely and ensuring that the unequivocal commitment that we received from Finance Canada officials regarding the amendments to the Bank Act will be equally reflected in the regulation.”

The Bank Act is reviewed every five years and will not be reviewed again until 2023.