A new day dawns as Carney cracks the whip on Canada’s ossified banking system

JPMorgan Chase & Co. believes in Canada. Last week, the biggest of big American banks said this country is destined to receive a portion of the US$1.5-trillion it plans to invest over the next decade in five sectors that include energy, defence and critical minerals.

“There’s just so much that we can do to help Canadian companies get on a different growth track,” said David Rawlings, chief executive officer of the bank’s Canadian operations.

The news is welcome. But for reasons beyond Canadians winning a shot at fresh capital. JPMorgan Chase & Co.’s decision to expand its role here signals the changes Prime Minister Mark Carney is imposing on a banking system that has historically protected big domestic incumbents at competition’s expense.

Opposition critics say the Prime Minister has accomplished little since coming to power. Conservative Leader Pierre Poilievre asked a Canadian Club audience in April, “So what has changed? Really?”

What is really changing is the country’s financial plumbing. Mr. Carney’s government is flushing out the clogs to make way for competition and growth.

The federal government’s 2025 budget started the process. It encouraged more federal credit unions and regulations were changed allowing smaller banks to scale before being subjected to public ownership rules, a move that gives small players a better chance to get their footing in the market.

The material measure of these changes is, however, most pronounced in the words and actions of Peter Routledge, who leads the Office of the Superintendent of Financial Institutions, or OSFI.

Since Mr. Carney came to power, Mr. Routledge has had to re-invent himself as Canada’s contrarian bank supervisor, tempering a relentless focus on stability that has been the hallmark of Canadian banking for more than a century.

That focus followed the country’s early history with bank failures and systemic instability attributed to “ruinous competition” by Ottawa.

Goading Canadian bankers by praising an American bank is one way of toeing Mr. Carney’s banking agenda. Mr. Routledge did just that on June 4, at the Senate committee on banking, commerce and the economy.

Mr. Routledge pointed to JPMorgan Chase & Co.’s US$1.5-trillion investment program and said, “Wouldn’t it be great if we had some Canadian banks step up and make the same commitment in Canada?”

He put out the welcome mat for JP Morgan Chase & Co. to expand its financing program to Canada and raised eyebrows on Bay Street suggesting a U.S rival had something to teach Canadians. Mr. Routledge is painting Canadian banks as the problem, an attempt to deflect criticism from OSFI.

OSFI has been under scrutiny since Mr. Carney become Prime Minister. Ottawa’s growth and competition agenda has pushed it to open doors more quickly for new banks, revising the application process from a three- to four-year exercise down to about a year, while providing a public dashboard on the OSFI’s website tracking application timelines.

The idea is to introduce innovators more quickly, even if it may lead to a small bank getting over its skis and failing.

OSFI’s leader has in turn become the unlikely advocate for small- and medium-sized businesses, suggesting banks ought to assume more risk and “support hardworking entrepreneurs,” he told the Senate committee on June 4.

The extent of change that Mr. Carney’s government is imposing on Canadian banking is reflected in what Mr. Routledge is now willing to countenance.

On Friday, OSFI announced it was lowering its Domestic Stability Buffer to 3 per cent from 3.5 per cent, reducing the capital banks must keep on hand for a rainy day and freeing up those funds for new loans and investments, a move it has resisted for some time.

This speaks to the risk-on mode at OSFI driven by Mr. Carney’s government.

But it isn’t just reflected in lower capital requirements. When speaking to The Globe and Mail in May, Mr. Routledge wondered, “If we had a little bit more of a risk appetite for the occasional financial institution failure, would the system produce more credit for economic growth?”

For a Canadian bank supervisor, this is wash-your-mouth-out-with-soap-talk. It violates Canadian banking’s cardinal rule – success is measured by stability, which is defined as no bank failing.

Mr. Routledge knows the rule well. In October, 2024, when defending the OSFI’s supervisory record in an interview, he compared U.S. and Canadian bank failures since the Great Financial Crisis in 2007-09.

“There have been over 500 bank failures in the United States, zero in Canada. … Zero bank failures indicate we must be doing something well,” Mr. Routledge said.

It’s 2026, and in Mr. Carney’s Canada, zero bank failures suggest the OSFI must be doing something wrong. How times have changed.