2024 Federal Budget: Highlights Affecting Financial Services – Financial Services

The 2024 Federal Budget targets three main areas related
to financial services regulation: housing
affordability; opportunities relating to digital
innovation; and banking accessibility. It
also includes various other measures that may be of interest to
financial institutions.

Some of the most significant initiatives impacting financial
services businesses are summarized in this bulletin.

Housing Affordability

As pre-announced, the 2024 Federal Budget includes proposed
support for 30-year mortgage amortizations for insured first-time
home buyers of newly built homes. It also increases the amount that
first-time buyers can withdraw from their RRSP from $35,000 to
$60,000, effective as of April 16, provided the related budget
legislation is passed.

The 30-year amortization option will be added to the Canadian
Mortgage Charter guideline, together with several expanded
expectations – including that banks will use rent payment
credit history to support mortgage applications, and that they will
proactively contact mortgagors with additional information to help
borrowers make informed decisions before renewals. The 2024 Federal
Budget also references a forthcoming “Home Buyers’ Bill of
Rights”.

The 2024 Federal Budget also has several targeted initiatives to
support mortgage lending. The government is exploring Halal
mortgages for Muslim Canadians, and promises more details in the
Fall Economic Statement. It also plans to consult with the mortgage
industry on making tools available through the Canada Revenue
Agency (CRA) to support income verification and reduce mortgage
fraud. In addition, legislative amendments to the National
Housing Act are proposed to permanently increase the in-force
limits for guarantees issued by the Canada Mortgage and Housing
Corporation (CMHC) in respect of mortgage-backed securities and
Canada Mortgage Bonds and for mortgage default insurance provided
by CMHC from the temporary $750 billion to $800 billion.

Digital Innovation

The government reaffirmed its commitment to consumer-driven
banking, also known as “Open Banking”, as announced in
the 2023 Fall Economic Statement. Additional background was
released concurrently in a separate policy statement, Canada’s Consumer Driven Banking
Framework. The Financial Consumer Agency of Canada (FCAC) is
being mandated to oversee the new framework, with funding also
allocated to the Department of Finance to support this work with
the implementation of a national security regime. For additional
information regarding developments with respect to digital
innovation and financial services, please refer to our bulletin Digital Innovation and Financial Services: What to
Expect in 2024.

Payments Canada also announced on April 16 that it was resuming
work on its Real-Time Rails project, which will facilitate
the 24/7 exchange of payments and is necessary to support Open
Banking objectives and fintech products.

Banking Accessibility

The 2024 Federal Budget references the ongoing work by the FCAC
to establish criteria for fee-free bank accounts to support basic
banking services. Although the 2024 Federal Budget does not
announce firm legislation, it notes that the FCAC is in
negotiations with banks to secure enhanced agreements to offer $0
per month and/or up to $4 per month fees for bank accounts that
reflect modern banking trends, including more transactions.

The government also announced that it will release new
non-sufficient fund (NSF) fee regulations in the coming months,
intended to cap the NSF fees charged by banks to $10 per instance
and prohibit fees for small overdrawn amounts under $10. They will
also require banks to alert consumers that they are about to be
charged an NSF fee, provide a grace period to deposit additional
funds, and restrict multiple fees for the same transaction and the
number of fees that may be charged in every 72-hour period.

Building on the changes announced in 2023 that committed to
lowering the criminal rate of interest from the equivalent of 48
per cent APR to 35 per cent APR, the 2024 Federal Budget also
announced additional Criminal Code amendments against
offering or advertising credit at a criminal rate of interest, and
simplifying the process to commence enforcement proceedings.

Other Measures

Although full details will not be available until budget
legislation or other bills are tabled, the 2024 Federal Budget also
proposes:

• amendments to the Proceeds of Crime (Money Laundering) and
  Terrorist Financing Act and related statutes to
  “strengthen the supervision, enforcement, and
  information-sharing tools” of Canada’s Anti-Money
  Laundering and Anti-Terrorist Financing framework;




• a detailed review of the federal deposit insurance framework,
  with consultations beginning in 2024 to explore if any changes may
  be necessary;




• funding for Prosper Canada to expand community-delivered
  financial help services;




• extending the “sunset date” for legislative review of
  the Bank Act, Insurance Companies Act and Trust and
  Loan Companies Act to June 30, 2026, from the current date of
  June 30, 2025;




• requiring federally regulated financial institutions (FRFIs) to
  annually disclose the diversity of their boards of directors and
  senior management, similar to the diversity disclosure model in the
  Canada Business Corporations Act, plus changes to
  modernize how FRFIs can deliver governance documents to their
  shareholders; and




• regulations to prescribe data/labelling details required for
  customer account statements and online banking records concerning
  government payments accepted for deposit.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.