OSFI Modernizes Approval Framework For Certain New Entrants

The Office of the Superintendent of Financial Institutions (OSFI) has launched a streamlined approvals framework designed to provide a more predictable and efficient path for targeted applicants seeking to become federally regulated financial institutions. This new approach enables earlier entry into the federal regime without requiring extended pre-licensing remediation, provided that risks can be effectively assessed and mitigated at the outset.

Eligibility for Streamlined Approvals Process

The streamlined approvals process is available to:

• Provincial credit unions (PCU) seeking to continue as federal credit unions; and
• Entities with technologically innovative or emerging bank models (such as fintechs or crypto-asset custodians) seeking to incorporate as a bank or federally regulated trust and loan company.

To assess a PCU’s suitability for the streamlined approvals process, OSFI will consider whether the PCU:

• Has a well-established, transparent, and readily understood business model, primarily based on activities and structures standard in the credit union sector;
• Possesses an established operating history and a demonstrated supervisory track record under a provincial regulatory authority;
• Has the capacity to maintain adequate capital over time through retained earnings, supported by stable, sustainable profitability appropriate to the credit union’s size, business model, and risk profile, with near-term forecasts reflecting continued profitability;
• Maintains systems and management capacity sufficient to support effective scaling at the federal level, commensurate with the nature, scope, and complexity of activities and the overall risk profile;
• Has a planned approach to engaging with its membership and the relevant provincial regulator on federal continuance, supported by a clear understanding of key aspects of the transition, including timing, process and impacts; and
• Has a clear and viable legislative pathway within the credit union’s home province to effect provincial discontinuance within a reasonable timeframe and without material uncertainty.

For entities with innovative banking models, OSFI will consider whether the applicant employs new or meaningfully different approaches to delivering or operating financial services that result in demonstrated improvements in areas such as efficiency, cost, speed, resilience, accessibility, and risk management. Examples include novel operating models, capabilities, distribution frameworks, or end-to-end process designs. OSFI will also assess whether the applicant offers new or materially differentiated financial products in Canada, such as novel account types, pricing or fee structures, or integrated bundled financial services that deliver differentiated and measurable value to customers. 

Applicants not suited for the streamlined framework will be formally advised and directed to OSFI’s existing approvals process.

Application Process

The streamlined process allows eligible new entrants to move efficiently through three defined phases.

1. Initial Readiness Assessment

This assessment phase supports early engagement between OSFI and applicants, enabling a focused assessment of readiness, including ownership, financial strength, and overall viability.

2. Ministerial Approval

Following the initial assessment, applicants must submit an application for Letters Patent to OSFI, providing comprehensive information to enable assessment against core regulatory requirements, including operational and financial resilience, risk governance, and integrity and security risks. Within 12 months, OSFI will submit a recommendation to the Minister of Finance for issuance of the Letters Patent, with any appropriate restrictions or conditions. The date of issuance marks the applicant’s incorporation as a new federally regulated financial institution. 

3. Operational Readiness 

After ministerial approval and the issuance of the Letters Patent, OSFI will continue its assessment, focusing on whether key people, processes, and systems are in place and meet expectations for operational readiness. Once any deficiencies are addressed, the applicant may submit a formal application to OSFI for an Order to Commence and Carry on Business (OCCB). The OCCB may be issued as early as three months following ministerial approval, or in alignment with the applicant’s operational commencement plans.

Moving Forward

For further information on OSFI’s expedited application process for new entrants, or its potential application to your business, please contact any member of our Financial Services Regulatory Group.