Canada published proposed bank and bank-holding-company regulations on 17 October, inviting comments within 30 days. They would set conditions for broader non-financial activities and investments.[1]
The existing Bank Act requires prior ministerial approval for specified information-processing activities in Canada and certain technology activities. Enacted amendments awaiting commencement would broaden financial-service-related activities, remove those approval requirements and permit investments in entities whose business is predominantly financial. The October consultation addresses the conditions for using those powers.[2][3][1]
How the proposed limits interact
Selected conditions for banks and bank holding companies
| Measure | Proposed treatment |
|---|---|
| Target eligibility | Financial activities: at least 60% of revenue, operating expenses or assets; latest four quarterly statements, or annual statements if quarterlies are unavailable.Source 1 |
| Revenue | At year-end: 15% non-financial revenue limit below C$12bn equity; 10% at C$12bn or more.Source 1 |
| Exposure | Covered ownership interests, loans and guarantees: 10% of regulatory capital at any time; federal financial institutions excluded.Source 1 |
Previously minister-approved activities are exempt within their approved scope. Specified existing technology activities receive a two-year transition. Breaching either cap would reclassify all covered investments as temporary.[1]
Deal teams would need a consistent classification of income and expenditure, together with a funding plan that follows the investment after completion. A business plan that separates the cost of buying a platform from the cash needed to support its growth would make the constraints easier to assess.
A qualifying target can still exceed the buyer’s capacity
Consider a hypothetical bank with C$10bn of equity, C$4bn of annual revenue and C$12bn of regulatory capital. Assume no other covered activities, no relevant exemption and a fully owned target with C$400m of annual revenue, 70% from financial services. The target clears the business-mix test. Its C$120m of non-financial revenue uses one fifth of the bank’s C$600m revenue allowance. These figures illustrate the proposed percentages; they describe no actual institution.[1]
Now assume the bank’s ownership interest has an accounting value of C$900m, it lends the target C$200m and guarantees another C$150m. Combined exposure is C$1.25bn against C$1.2bn of capacity: C$50m too much, despite comfortable revenue headroom. Reducing the loan by that amount would make the example fit exactly, leaving no space for another covered exposure. A price negotiation and a funding negotiation can therefore have different effects on whether a transaction fits.
The investment has to keep fitting
For banks, section 471 generally gives a temporary investment two years to cease being a controlling or substantial holding, subject to the Superintendent’s powers to set or extend the period. Separate approval provisions can also apply. Reclassification is consequently an exit or restructuring issue, rather than a harmless accounting label.[4]
For fintech founders, the practical opportunity is a potentially wider set of bank ownership structures. For buyers, the discipline is to model the target’s business as it develops: a new commercial product can change the revenue mix, while an additional loan or guarantee can consume funding capacity. Those effects belong in the investment case and subsequent monitoring, alongside the strategic value of the technology.
Sources & further reading
- Proposed bank activity regulations Department of Finance Canada · 17 Oct 2026 · Accessed 21 Oct 2026
- Bank Act, section 410 Department of Justice Canada · Accessed 21 Oct 2026
- Bank Act amendments awaiting commencement Department of Justice Canada · Accessed 21 Oct 2026
- Bank Act, section 471 Department of Justice Canada · Accessed 21 Oct 2026