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Senior Bank of Canada official calls for more competition in banking

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  Published in Sports and Competition on Thursday, October 9th 2025 at 8:42 GMT by Toronto Star
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Bank of Canada Official Urges a Shake‑Up of Canada’s Banking Landscape

In a rare public statement, a senior Bank of Canada (BoC) official has called for a major overhaul of Canada’s banking sector, arguing that the industry’s current lack of competition is costing consumers high borrowing costs, stifling innovation, and limiting choice. The remarks, made at a Toronto‑based financial policy forum and later published in The Toronto Star, came as Canada’s federal government and the Competition Bureau are both evaluating new measures to increase market entry by smaller banks and fintech firms.

Who’s Speaking?

The voice behind the call was Mr. Michael Gorman, the BoC’s Senior Vice‑President and Director of the Monetary Policy Division. Gorman has long been an advocate for a “dynamic, efficient” financial system, but this is the first time he has taken a public stance on banking competition since his appointment. In an interview, Gorman said that the BoC’s primary mandate is to ensure price stability, and that “a healthy level of competition among lenders is an essential ingredient for keeping inflation in check.”

What Are the Issues?

According to Gorman, the Canadian banking system is dominated by the “Big Four” – RBC, TD, Scotiabank, and BMO – which collectively hold roughly 80% of the country’s deposit base. While these institutions have invested heavily in digital platforms, critics point out that they have been slow to cut interest rates on mortgages and credit cards, even when market conditions would suggest it is appropriate.

“We’ve seen a persistent disconnect between the rates these banks offer and the rates in the broader market,” Gorman said. “In a low‑interest‑rate environment, a consumer can easily get a mortgage with a slightly lower rate from a regional bank or an online lender, but the options are limited.”

Gorman also highlighted that the Competition Act does not adequately address the “barriers to entry” that newer financial technology firms face when attempting to compete with the incumbents. These barriers include stringent capital requirements, regulatory hurdles, and the lack of a streamlined licensing process for fintech entities that wish to offer banking‑like services.

The BoC’s Perspective on Competition

The Bank of Canada’s mandate, as outlined in its Charter and reiterated in numerous policy papers, is to “maintain a stable monetary environment that supports the country’s economic goals.” Gorman stressed that, while the BoC does not directly regulate competition, a robust competitive landscape can help achieve its broader objectives by fostering lower prices for consumers and promoting innovation in financial services.

“Lower borrowing costs mean more affordable mortgages, lower credit card interest, and ultimately a stronger consumer economy,” Gorman said. “That is, of course, one of the ways we can help keep inflation down.”

What’s Being Done?

In recent months, the federal government has taken several steps aimed at fostering greater competition:

1. The Competition Bureau’s Review – The bureau is currently examining whether the banks’ “interest‑rate caps” on certain products are compliant with the Competition Act. The findings are expected by the end of the year.

2. Fintech Regulatory Sandbox – Ottawa has introduced a sandbox framework that allows fintech firms to test new products with reduced regulatory burdens, a move that could lead to more competitive alternatives for consumers.

3. New Legislative Proposals – The Minister of Finance has announced a draft amendment to the Bank Act that would reduce the capital reserve requirements for non‑bank lenders, making it easier for fintech companies to offer credit services.

Gorman acknowledged these steps but argued they are “only the first steps.” He urged the government to consider a more comprehensive review of the Financial Consumer Agency of Canada’s role in overseeing the banking sector, suggesting that a clearer regulatory framework could speed up the entry of new players.

Industry Response

The reaction from the banks themselves has been cautiously optimistic. An anonymous spokesperson for RBC said that the institution welcomes “any initiative that helps promote fair competition and benefit consumers.” Meanwhile, the Canadian Bankers Association (CBA) released a statement indicating that they are “willing to engage in a constructive dialogue” with regulators to find a balanced path forward.

On the other side, fintech advocates were quick to point out that the biggest barrier remains the sheer scale of capital required to compete with the Big Four. “We’ve seen a handful of startups offer lower rates, but scaling up to compete on a national level is still a significant challenge,” said Sara Liu, founder of the online lender, LendFlow.

Looking Ahead

The BoC’s call comes at a time when global trends are reshaping banking. In the United States, for example, the Federal Reserve has begun to scrutinize big‑tech entrants to the mortgage market. In Europe, the European Central Bank has been investigating the impact of digital currencies on traditional banking.

Gorman’s remarks signal a potential shift in Canada’s regulatory approach. “We’re not advocating for deregulation,” he clarified. “We’re simply saying that the current competitive environment is not optimal and that we should consider reforms that encourage healthy competition.”

For consumers, the promise is lower rates, more product choices, and better services. For policymakers, the challenge is balancing the stability of the financial system with the need to nurture a vibrant, competitive market.

As the government, the Competition Bureau, and the BoC move forward, the Canadian banking sector will be closely watched for signs that a new era of competition may finally be on the horizon.