Canada’s financial watchdog will fast-track applications for banking licences from credit unions, fintechs and other “technologically innovative” businesses, in an effort to speed up the notoriously slow process.

Picking up the pace: The Office of the Superintendent of Financial Institutions (OSFI) released details about the new fast-track framework last Thursday, during a virtual meeting giving financial-services industry workers the opportunity to ask questions of the regulators’ staff. Starting in June, OSFI will launch a 12-month pilot program to test what it says will be “a clearer, more risk-based and predictable pathway” to getting a banking licence. The regulator is committing to tight deadlines for various stages of the new application process—four weeks for initial feedback, a year to make recommendations to the finance minister and three months to give new banks the official green light to launch. It plans to publish a dashboard tracking applicants’ progress.

Taking on the Big Six: Proponents of increased competition in Canada’s financial services sector have long criticized the difficult, lengthy and expensive path to getting a banking licence. It took fintech Questrade six years to get approval to launch Questbank in November. Challenger Koho is still waiting, after starting the process in 2021.

Canada’s banking sector is famously concentrated, with the Big Six banks holding 93 per cent of all assets. The country’s big banks also have some of the highest returns in the world, with their domestic banking operations outperforming their international divisions on profitability. In an October speech, Bank of Canada senior deputy governor Carolyn Rogers made a case for more competition in the sector, saying the high levels of concentration have ripple effects throughout the economy.

Koho CEO Daniel Eberhard said he welcomes OSFI’s attempt to speed things up. “It’s great to see. We got this wrong in Canada for a long time. Competition and stability are complementary, not opposing forces,” he said. Fintechs Canada executive director Adriana Vega said the pilot project “is a great first step in lowering barriers to entry and fostering a more competitive marketplace.”

Ethan Teclu, a spokesperson for the Canadian Bankers Association (CBA), said in an email that the country’s banking sector is already highly competitive. He said the CBA is still reviewing OSFI’s pilot program, but noted the industry group has long supported efforts to make it easier for federal credit unions to expand. “We welcome innovation in offering choice and access for Canadians and believe in the principle of same activity, same risk, same regulations,” he said.

We’re a regulator, and we’re here to help: In an online post, Torys lawyer Eli Monas noted that a previous attempt to streamline the application process actually ended up making it take longer. More than a decade ago, OSFI started encouraging potential applicants to provide a business plan and other materials in advance of a formal banking licence application, in response to complaints from business owners who spent millions of dollars only to be told years into the process that their proposal wasn’t going to pass muster. “While very well intended, this pre-application phase ended up increasing the timeline for incorporation by at least another year,” he wrote.

“Be careful what you wish for”: In an interview, Monas warned fintechs that while a banking licence—and oversight by OSFI—can confer credibility, it also brings annual supervisory reviews, deeper scrutiny and higher internal costs to keep up with compliance. He described the new initiative as a move away from an old OSFI regime where “every single t [had to be] crossed and i dotted” before approval. Instead, the regulator will take a more tailored approach, assessing risks specific to each applicant—particularly credit and anti-money laundering exposure for bank-like fintechs. Canadian regulatory frameworks often evolve slowly, a reality that has fuelled industry frustration in the past. However, Monas said OSFI’s commitment to fixed timelines—and a public dashboard tracking applicants’ progress—signals an effort to build accountability into the process. Companies can’t apply to this fast-track program until the pilot launches, with updated guidance to come beforehand, he said.

A new era: In an email, OSFI spokesperson Cory Harding said the regulator has historically “placed greater emphasis on resilience than on competition” and acknowledged “the lengthy approval process has discouraged some innovators.” The regulator hasn’t relaxed its standards, but is adjusting its appetite for risk, he said: “We are prepared to accept the orderly failure of a regulated institution when appropriate, but we continue to have a low appetite for failures that could pose broader systemic risk.” Faster processing times won’t compromise oversight, he said.