Fourth annual meeting of the Financial Services Committee

Video conference, 17 and 22 June 2021

Joint report

The CETA Financial Services Committee met via video conference on 17 and 22 June 2021.

Canadian participants during the principal delegates’ session on 17 June included officials from: the Department of Finance Canada; the Office of the Superintendent of Financial Institutions; the Bank of Canada; the Financial Consumer Agency of Canada; and the Canada Deposit Insurance Corporation. Representatives from the provinces and territories were invited to participate in a topical seminar on digital finance on 22 June.

The EU was represented by officials from: the European Commission’s Directorate General for Financial Stability, Financial Services and Capital Markets Union and Directorate General for Trade; the European Supervisory Authorities (the European Banking Authority, the European Insurance and Occupational Pensions Authority, the European Securities and Markets Authority); the Single Resolution Board; and the European Central Bank.   

Priorities

The discussion on Day 1 (17 June) was in large part dedicated to the COVID-19 crisis, including an update on the impact of the crisis on Canada’s and the European Union’s (EU) economies and the banking and insurance sector in particular. The overall response to the COVID-19 crisis has been broadly similar, with both jurisdictions deploying unprecedented policy support to foster financial stability and support households and business, in coordination with domestic and foreign regulatory partners. Additional discussions included an update on international developments in the financial services sector, and forward-looking financial sector regulatory and policy priorities.

The discussion on Day 2 (22 June) focused on digital finance, an increasingly important policy priority for both jurisdictions, which has accelerated as a result of the COVID-19 crisis.

COVID-19 financial sector response and recovery

The Bank of Canada presented an overview of its 2021 Financial System Review^{Footnote 2} and measures to support market functioning during the crisis. Finance Canada provided an overview of the government’s broader economic support measures to mitigate the impacts of the crisis on households and businesses. The Office of the Superintendent of Financial Institutions provided an update from a prudential perspective. The Financial Consumer Agency of Canada provided a snapshot of consumers’ financial well-being. The European Commission presented the results of the 2021 European Financial Stability and Integration Review^{Footnote 1}. Participants on the EU side also outlined ongoing crisis management efforts, including the unprecedented number of policy measures undertaken at the national and EU level, and a shift towards targeted measures to bolster the recovery. A key takeaway was that a combination of a coordinated and proactive policy response has promoted the resilience of both sides’ financial systems, mitigated income losses for households and businesses, and fostered an economic rebound since the committee’s last meeting in June 2020. Both sides recognised the continued uncertainty and the importance of remaining vigilant in monitoring risks, with a view to maintaining appropriate policy support to avoid instability as the recovery phase continues.

International developments

Both sides noted the excellent relationship between the EU and Canada at the international level, including at the G20 and Financial Stability Board. They informed each other of the state of implementation of the last batch of Basel III reforms in their respective jurisdictions. Both sides agreed on the importance of working in a coordinated manner to meet current and emerging challenges, as part of steering the global economy to recovery. They also discussed recent bilateral and multilateral developments, fostering digital innovation while mitigating risks, and sustainable finance initiatives

Regulatory and policy priorities

This session provided an opportunity to develop a deeper understanding of both sides’ financial sector regulatory and policy priorities as their economies emerge from the recessionary impacts of the COVID-19 crisis. Canada outlined plans to update and develop new risk management guidance to build financial sector resilience to a range of non-financial, cyber, and climate risks. Canada provided background on its framework for reviewing the federal financial institutions statutes, in anticipation of a 2025 review. Both sides provided updates on their strategic priorities related to Anti-Money Laundering / Countering the Financing of  Terrorism (AML/CFT), including EU plans to create a new bloc-wide AML/CFT supervisory authority and recent Canadian efforts to update and expand its AML/CFT regulatory framework. Both sides welcomed renewed G7, G20 and FSB focus on sustainable finance, including on disclosures, and held a fruitful discussion on their respective efforts to foster the mobilization of capital for sustainable activities in support of achieving sustainability targets and net zero emissions objectives. Both sides noted a common interest in sustainable finance issues, exchanged updates on efforts to advance taxonomies for identifying sustainable investments. They discussed the importance of climate change and natural disasters as a financial stability risk and agreed on the importance of working together both bilaterally and in multilateral fora in the pursuit of shared climate neutrality ambitions. 

Digital finance

On Day 2, participants exchanged updates on their respective approaches to open banking, stablecoins, central bank digital currencies, risk mitigation, data flows, competition and big tech in financial services, and consumer protection in the digital environment. The European Commission updated on initiatives in the digital finance sphere including the Digital Finance Strategy. Canada updated on efforts to develop an innovative open banking framework, and progress in implementing a modernized consumer protection framework. Both sides exchanged views on the treatment of financial services in the WTO’s e-commerce negotiations. Participants noted their shared interest in many of the topics and look forward to continued close engagement both bilaterally and in multilateral fora going forward.

Conclusion

Both sides recognised the importance of the Financial Services Committee as a forum to build and maintain strong bilateral relationships and to enable collaboration on key issues that affect the financial services sector. They expect to meet again in the second quarter of 2022. In the interim, officials will follow up bilaterally, as agreed and as appropriate, on topics discussed in this forum.