Competition regulator urges open banking adoption, aiming to enhance financial sector rivalry
Canada's Competition Bureau is advocating for the adoption of an open banking framework to enhance competition in the financial sector, as reported by BNN Bloomberg.
This recommendation aims to facilitate easier consumer transitions between financial institutions and introduce more competition among established providers.
The bureau identified open banking as a pivotal strategy that enables consumers to share their banking data with third parties, empowering new service providers and challenging the dominance of traditional banks.
This approach was highlighted in the bureau's advice to the Department of Finance, which is currently evaluating measures to bolster competition within the sector.
Open banking promises to offer consumers greater control over their financial data, enabling access to various financial management tools, including budgeting apps, the consolidation of financial accounts, and streamlined payment solutions.
It also proposes significant advancements in credit assessments, allowing lenders to directly access a consumer's banking data for a comprehensive evaluation beyond just credit scores.
In response to the federal government's commitment to legislate an open banking framework in the upcoming budget, the Competition Bureau urges swift implementation. The bureau believes an effective consumer-driven banking model will significantly enhance market competition by lowering entry barriers, encouraging consumer mobility, and supporting multiple banking relationships.
Additionally, the bureau suggests reforms to facilitate easier switching for uninsured mortgage borrowers between banks without needing a stress test. It criticizes the current uneven stress test application during mortgage renewals, which unfairly disadvantages borrowers seeking better rates with new lenders.
The bureau also addresses the need for a revised approach to evaluating proposed mergers within the financial sector. While not advocating for a blanket ban on mergers, it recommends reforms that would require merging entities to demonstrate that their consolidation would not adversely affect competition.
In a related development, the Royal Bank of Canada announced the closure of 25 HSBC Bank Canada branches and the rebranding of additional branches following its acquisition.
This move is part of RBC's broader strategy to integrate HSBC's operations into its network. The takeover is set to finalize on March 28, marking a significant shift in the Canadian banking landscape.
