The Wait Is Over: Draft Regulations Expand the Scope of Permitted Non-Financial Activities for Canadian Banks and Other FRFIs

On October 17, 2026, the Department of Finance published proposed regulations to implement the long-awaited 2018 amendments to federal financial institutions legislation that expand the permissible scope of non-financial activities for federally regulated financial institutions (FRFIs). The published package includes four sets of regulations (collectively, the Draft Regulations):

• Non-Financial Activities (Banks and Bank Holding Companies) Regulations
• Non-Financial Activities (Foreign Banks) Regulations
• Non-Financial Activities (Insurance Companies, Societies and Insurance Holding Companies) Regulations
• Non-Financial Activities (Trust and Loan Companies) Regulations

The regulations are substantively similar and allow for the implementation of the non-financial activity amendments for all FRFIs, including banks, authorized foreign banks, insurers, and trust and loan companies.

2018 Amendments to FRFI Legislation

FRFIs are currently broadly restricted from carrying on non-financial services activities, except where the legislation specifically permits the non-financial activity or where the activity appertains to the business of banking. Some activities, such as those involving information processing or technology activities, require the prior approval of the Minister of Finance. The permitted investment regime under the FRFI legislation similarly restricts FRFIs from making investments in entities that engage in non-permissible commercial activities, subject to the temporary investment powers available to FRFIs.

The Draft Regulations supplement the amendments introduced to the FRFI statutes by the Budget Implementation Act, 2018, No. 1 (Bill C-74), which were intended to broaden the scope of activities that banks and other FRFIs could engage or invest in, given the rise of financial technology companies and the increased use of new technologies in the financial services sector (collectively, the 2018 Amendments).

Together, the 2018 Amendments and the Draft Regulations permit FRFIs to undertake and invest in a broader range of technology and non-financial commercial business opportunities. Specifically, a FRFI would be permitted to engage in any activity that “relates to the provision of financial services” by the FRFI or its affiliates, as well as a broader set of information processing and technology activities. The Draft Regulations refer to these activities as “non-financial activities.” Under the investment rules, a FRFI is permitted to control or acquire a substantial investment in an entity engaging in non-financial activities or in an entity where a majority of the entity’s business, as defined in the Draft Regulations, consists of financial services activities. These investments and the in-house non-financial activities generally do not require regulatory approvals but are subject to the caps and reporting obligations set out in the Draft Regulations that are discussed below. By authorizing increased investment by FRFIs in innovative sectors, the regulatory framework seeks to enhance the financial sector’s adaptability to technological advancements and improve service offerings for consumers through investments and partnerships with advanced technology providers.

Three Pathways to Non-Financial Activities

Once the Draft Regulations are brought into force, there will be three distinct paths by which FRFIs will be able to engage in non-financial activities without prior approval, in each case subject to the caps and reporting obligations described below:

• Directly Through Business Powers: FRFIs will be able to conduct permitted non-financial activities in-house. As noted, these broadly include any activity that relates to the provision of financial services by the FRFI or its affiliates, as well as information processing and technology activities. FRFIs will also continue to be permitted to engage in the business appertaining to the business of banking (in the case of banks) or to the business of providing financial services (in the case of other FRFIs).
• Investing in a Majority Financial Services Entity: FRFIs will be able to invest in an entity where a majority (60% or more) of the entity’s revenues, asset value or aggregate value of operating expenses come from financial activities.
• Through a Subsidiary Engaging in a Permitted Non-Financial Activity: FRFIs will be able to invest in an entity that engages in permitted non-financial activities.

Limitations in the Draft Regulations

To ensure that FRFIs remain primarily oriented toward the provision of core financial services and to mitigate prudential risks associated with non-financial activities, the government has instituted specific exposure and revenue caps in the Draft Regulations.

The framework establishes a tiered system based on the size of the institution, governed under the investment rules of the FRFI statutes:

• Large Institutions: For FRFIs with C$12-billion or more in equity, the regulations impose a 10% non-financial revenue ceiling and a 10% regulatory capital exposure limit for non-financial activities.
• Small and Medium-Sized Institutions (SMEs): For institutions with less than C$12-billion in equity, the framework provides an expanded 15% revenue cap, while maintaining the identical 10% regulatory capital exposure limit.

Reporting Requirements

To monitor the use of these expanded powers, the Draft Regulations introduce comprehensive reporting requirements. These requirements apply only to FRFIs with C$12-billion or more in equity. The Regulatory Impact Analysis Statement released with the Draft Regulations specifies that these reporting obligations are designed to enable the Department of Finance to observe how FRFIs are deploying their new business and investment powers, proactively identify emerging systemic risks, and support the ongoing evaluation of the regulatory framework.

Consultation Period

The publication in the Canada Gazette initiates a 30-day public consultation period for the Draft Regulations, concluding on November 16, 2026. Following the review of public consultation submissions, the government will issue an Order in Council to bring into force the Draft Regulations and the 2018 Amendments.

If you have any questions please do not hesitate to contact the authors or another member of the Financial Services Regulatory group.