How far should a bank be allowed to move into technology businesses - and what should keep that expansion connected to financial services?
Four proposed regulatory packages published in the October 17 Canada Gazette address that question for banks, foreign banks, insurers, and trust and loan companies.
The proposals would establish conditions governing expanded non-financial activities and investments, including technology-related business. They are proposed regulations, not new operative permissions. Canada Gazette.
For financial-services lawyers, the development could become important to fintech acquisitions, investments and partnership structures.
Broader flexibility comes with boundaries
The proposed bank regulations combine investment flexibility with aggregate limits and reporting requirements.
For “majority financial services” entities, the proposed test is at least 60%, measured using the greatest of the relevant financial-activity proportions of revenue, operating expenses or assets.
Large institutions would face transaction and annual reporting obligations. Interested persons may make representations within 30 days after publication. Canada Gazette.
The proposal therefore concerns both what institutions could do and how they would measure and explain those activities.
A technology label will not answer the eligibility question
A target company’s description as a fintech does not establish how its activities fit a regulatory category.
Counsel would need to examine its actual business: what it sells, how it earns revenue and which activities relate to financial services.
That requires coordination with financial and operational teams. A legal conclusion about eligibility depends on information that may sit outside the transaction documents.
The analysis should also distinguish acquiring control from taking a substantial investment. Different structures can raise different reporting and governance questions.
Aggregate limits make portfolio information important
A proposed investment cannot necessarily be assessed in isolation.
Where limits apply across an institution’s activities or holdings, counsel need a reliable account of existing exposure and the methodology used to calculate it. A transaction that appears permissible on its own may require further examination when combined with other business.
That creates a continuing compliance task after closing.
Changes in a target’s business could affect the assessment even where the original acquisition structure remains unchanged. Reporting systems should therefore connect legal classifications with updated financial information.
What firms can examine during consultation
Institutions and potential counterparties can test the proposal against realistic transactions.
Useful questions include whether the categories capture intended business models, whether the calculations can be performed consistently and what information investors would need from targets.
For deal teams, proposed flexibility should inform planning without being treated as authority already available. Any transaction must still be assessed under the law in force when the relevant action occurs.
The opportunity is broader investment flexibility. The work is proving where each activity fits and keeping the calculations current.
Related coverage: Banking Regulators Ask Whether Autonomous AI Agents Can Be Controlled.
Sources: Canada Gazette: proposed bank regulations · Canada Gazette: October 17 proposed regulations .