Canadian government and regulators (specifically the Department of Finance and the Office of the Superintendent of Financial Institutions, OSFI) exercise tight control over private banks. This regulatory grip is precisely why the system is considered one of the most stable in the world.

However, the Bank of Canada (BoC) and others argue that this stability comes at a significant cost: low productivity and high costs for consumers and businesses.

Canada’s banking system navigated the 2008 global financial crisis without any bank failures or taxpayer-funded bailouts, a feat unmatched by many other developed nations.

Why?

The handful of dominant banks (the “Big Six”) are well-capitalized and face very strict oversight. Regulators ensure they hold massive buffers, making them highly resilient to shocks. The stability of the financial system is prioritized above all else. That means that they are too big to fail.

The government treats banking as a core public utility that must be managed for the safety of the entire economy, justifying heavy regulation to prevent systemic risk.

But lets dive deep in  Speech given by Carolyn Rogers, Senior Deputy Governor of the Bank of Canada, titled “Productivity’s competitive edge” on October 9, 2025 she stated:

“It would also be hard to argue, on any objective measure, that Canada’s banking system is anything other than an **oligopoly**.”

“The 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 comes 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*.”

Her entire speech used the financial services industry as a central illustration for her broader argument that a lack of competition is a key cause of Canada’s productivity slump, which she had previously called a “national emergency” (in a 2024 speech titled “Time to break the glass: Fixing Canada’s productivity problem”).

The argument being made by the Bank of Canada and other economists is that while government control ensures stability, the resulting oligopoly (a market dominated by a few firms) stifles the very forces that drive a productive, innovative economy.

Issue: Lack of Discipline, Lower Innovation, Higher Costs for consumer, Resource Misallocation….

• Lack of Discipline: Dominant firms face less pressure to cut costs or improve services. They can maintain high fees and slow innovation because customers have few truly competitive alternatives.
• Lower Innovation: New, smaller firms (FinTechs) struggle to enter a market dominated by the Big Six, leading to less investment in new technology and fewer new services for consumers.
• Higher Costs: The lack of competitive pressure means banks can charge higher fees and offer less favorable rates on loans and deposits, effectively taxing businesses and households and slowing overall economic growth.
• Resource Misallocation: Without competition, resources aren’t necessarily flowing to the most productive firms or ideas, contributing to Canada’s overall weak record on productivity and business investment.

The BoC’s core statement is that the current regulatory mix has tilted the balance too far toward stability and away from competition, making Canadians and the economy poorer in the long run. They are arguing for policy changes like Open Banking and payments modernization to introduce more competition without sacrificing the safety net provided by government regulation.