Canada's Financial Sector Needs Increased Competition, Bank of Canada Official Says — Update

By Paul Vieira

OTTAWA--The Bank of Canada's No. 2 official endorsed increased competition in the country's highly concentrated financial-services sector, saying this would help lift Canada out of its prolonged productivity slump.

Carolyn Rogers, the central bank's senior deputy governor, on Thursday said Canadian authorities have done a stellar job in regulating banks by ensuring they have enough capital to survive shocks such as the 2008-to-2009 financial crisis and the Covid-19 pandemic. "It would also be hard to argue, on any objective measure, that Canada's banking system is anything other than an oligopoly," said Rogers, according to prepared remarks set for delivery before a Toronto business crowd.

Rogers cited data indicating the country's six largest lenders hold over 90% of the country's banking assets. The banking sector's concentration has contributed to financial stability in Canada, she said--adding, though, that this come at the cost of greater innovation and competition.

"Greater contestability, more new entrants and more innovation in our financial sector would lead to competition that's good for consumers, for productivity and for our economy. We should lean into it," Rogers said.

Rogers last year delivered a speech declaring that Canada's moribund productivity had become a national emergency that required urgent action from policymakers. In that speech, she cited lax competition and weak business investment as the main culprits.

The latest Canadian data indicate that productivity--treated as a gauge of a country's living standards--fell 1% nonannualized in the second quarter, and declined about 3% from a year earlier. Improved productivity, economists say, would help firms offset higher input costs and lead to an increase in inflation-adjusted wages.

In the speech, Rogers said the need to boost productivity has taken on greater urgency with President Trump's shift on trade policy, which has left the Canadian economy--long reliant on exports to the U.S.--exposed and now struggling. "Higher productivity won't make Canada immune to U.S. trade policy, but it would help buffer the effects of tariffs," she said.

Rogers said the U.S. and U.K. are taking steps to pare back financial-sector regulations. And recently, Canada's chief banking regulator said there might be room to ease rules in terms of allowing new entrants into the sector.

She cited two significant changes under way, related to the real-time payments system and open banking, that have the potential to improve financial-sector competition. They are both close to implementation, "but each needs a final push to get across the finish line," she said.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

October 09, 2025 08:30 ET (12:30 GMT)