Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
OSFI Rebalances Regulation for Growth and Competition
September 14, 2026 | NCFA Insight | Competition And Market Structure, Regulation And Policy, Capital Markets Infrastructure And Funding
Routledge Speech Puts Growth and Competition Higher on OSFI Agenda
On September 11, 2026, Superintendent Peter Routledge delivered a speech at the Economic Club of Canada, explaining how the Office of the Superintendent of Financial Institutions (OSFI) is refining its risk appetite. Financial resilience remains central, but OSFI is giving more weight to economic growth and competition when it decides whether a regulatory requirement is proportionate to the risk.
For financial technology firms, smaller banks, federal credit unions and prospective entrants, the commercial question is whether those decisions make Canada's regulated financial market easier to enter and compete in. Some fintechs may eventually seek a federal bank, trust or loan company structure. Others need regulated partners that can support new lending, payments or financial products without the economics forcing every partnership toward Canada's largest institutions.
OSFI is already changing parts of that equation. New entrants have a more structured approval process, selected capital requirements are being recalibrated and unnecessary supervisory material is being removed. The value to the market will depend on what happens to entry costs, operating economics and the number of credible competitors that reach customers.
Entry Economics Matter More Than Access
OSFI's Streamlined Approvals Framework for Targeted New Entrants is one of the clearest examples of the new competition objective. Eligible provincial credit unions and firms with innovative or emerging banking models now enter a more defined process that begins with a readiness assessment before formal approval and operational preparation.
A clearer process can materially affect a startup's economics. Legal and advisory costs continue while an application is underway, and management time spent on regulatory work is time not spent building the business. Investors can also have capital tied up well before regulated revenue begins.
Peter Routledge, Superintendent, OSFI
"We aim to create a smoother, more accessible pathway for credible new entrants navigating the federal process, without lowering our standards."
Faster decisions would reduce uncertainty, but approval itself is a poor measure of competition. Approval only matters if those firms can operate, grow and compete once they enter the market. New institutions need enough customers and revenue to absorb regulatory costs while continuing to meet OSFI's prudential requirements.
See: OSFI Clarifies Tokenized Deposits and 2027 Crypto Rules
This is especially relevant to fintechs that never become federally regulated institutions themselves. More smaller banks, trust companies and credit unions can create additional counterparties for new financial products. A fintech gains little from an open market on paper if only a handful of institutions can support the partnership economically.
Proportionate Rules Can Change Who Competes
Regulation weighs differently on a large bank and a smaller financial institution. A large bank can spread reporting and compliance expense across a vast customer base. A smaller competitor has fewer accounts and loans over which to recover the same fixed costs.
Capital rules affect the equation as well. OSFI's 2027 rules reduce the risk weight on unrated corporate small and medium sized enterprise exposures to 75% from 85%. The maximum exposure that can qualify as a small business entity for lower regulatory retail treatment also rises to $2.5 million from $1.5 million.
OSFI's 2027 package also changes the treatment of some corporate exposures, covered bonds, securitization and market risk. Category I and II small and medium sized banks can use simplified capital treatment for qualifying exposures, subject to limits. The rules also introduce a streamlined application process for smaller banks seeking approval to use internal credit models.
OSFI has made selected changes elsewhere, including residential development and covered bonds. The changes are targeted rather than a general reduction in capital standards. Their commercial significance comes from matching regulatory cost more closely to the risk an institution actually takes.
Peter Routledge, Superintendent, OSFI
"We seek to avoid the 'stability of the graveyard' in which a docile, risk-averse financial system impedes prosperous growth."
The effects aren't limited to banks. Fintechs also depend on smaller regulated institutions for partnerships, distribution and access to financial products. Smaller regulated institutions finance businesses, compete for deposits and provide services that fintechs build on top of. If prudential requirements consume more capital or operating expense than the underlying risk warrants, fewer institutions can compete effectively and fintechs have fewer potential partners.
OSFI is also removing material it considers redundant, obsolete or trivial. By April 2026, it said 52 documents and more than 600 pages had been eliminated. The result is lower recurring cost or less management time spent satisfying requirements that don't materially improve supervision.
Competition Mandates Need Outcome Data
Canada already has experience with regulators being asked to consider competition more explicitly. Ontario expanded the Ontario Securities Commission's mandate in 2021 to include fostering competitive capital markets and capital formation. NCFA reviewed that expanded growth duty in a comparison of pro innovation regulation in Canada and the UK. The OSC subsequently built out its Office of Economic Growth and Innovation and continued experimenting with regulatory relief and testing programs.
NCFA had been asking regulators to go further years earlier. Its 2018 OSC priorities submission called for better data and performance measures tied to market outcomes. Capital formation and compliance costs were among the measures that could show whether regulation was actually improving the market.
An innovation office can improve communication with a regulator, and an exemption can remove a specific obstacle. Neither proves that competition increased. If a business still cannot earn enough to support the cost of being regulated, the market doesn't gain a sustainable competitor.
See: NCFA Submission on Regulatory Burden
Investment crowdfunding provides a useful example. A competitive framework should encourage new equity crowdfunding dealers and portals to enter the market in the first place. That requires economics that can support the people, technology and regulatory work needed to operate. If the cost and complexity of registration discourage new entrants before they launch, or make it difficult for existing firms to reach sustainable scale, competition will remain limited.
NCFA raised similar concerns in its 2018 submission to Finance Canada, where regulatory fragmentation and compliance costs were identified as barriers to fintech growth. The association looked at the same issue in a a more recent analysis of financial market access and productive growth. Access has economic value when firms can turn it into customers, capital and competitive products.
Provincial regulators can make their competition mandates easier to evaluate by publishing more market outcomes. Approval times can be compared before and after reforms. Regulators can show how many entrants begin operating and whether they remain active. They can also disclose enough data to assess whether smaller firms are raising more capital or taking a larger role in the market.
Those metrics would distinguish regulatory activity from competitive results. Supporting fifty firms through an innovation office is useful information. Knowing how many of those firms reached the market, survived and won customers tells stakeholders much more about whether the mandate is working.
OSFI Can Make Competition Measurable
Routledge addressed the issue directly at the Scotiabank Financials Summit on September 10.
Peter Routledge, Superintendent, OSFI:
"Our role is to ensure the prudential framework does not create unnecessary barriers to responsible competition."
OSFI already has a decent starting point because its new approvals process includes a public dashboard. Processing times can show whether regulatory entry becomes faster and more predictable. OSFI could also report how many applicants become operating institutions and how long they remain active.
OSFI should also show whether smaller institutions are actually seeing lower regulatory costs, better funding access and more room to compete. If proportional supervision is working (or not), those changes should be visible in recurring compliance costs, capital use and funding outcomes.
See: Canada's C$14T Non Bank Financial System Opens Up
Market performance should complete the picture. A new entrant that reaches customers and grows while maintaining strong capital is evidence that entry and resilience can coexist. A faster application process followed by few successful competitors would point to remaining barriers elsewhere.
Canada's largest banks will retain substantial advantages in distribution and customer scale. OSFI cannot remove those commercial strengths, nor should it try. Its role is to ensure that prudential requirements don't add an unnecessary regulatory advantage on top of them.
Talking Point
OSFI's revised risk appetite only matters if it changes who can compete and at what cost. More credible entrants, lower unnecessary regulatory burden and better funding economics would be stronger evidence of success than faster approvals alone (provided financial resilience remains intact).
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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