Financial institutions embrace new regulations

Like many sectors, the financial services industry has been turned on its head by the COVID-19 pandemic and subsequent economic fallout. The financial regulatory environment has seen a slew of new relief measures, regulations and guidelines in an effort to stabilize the economy.

The most important measures to date have been on the regulatory relief side, according to Michael Garellek, a partner and co-leader of the financial services regulatory group at Gowling WLG. Many reporting deadlines have been extended while measures have been relaxed to encourage lending from banks. 

“It takes greater vigilance and a greater effort in consulting the websites of regulators because relief measures and restrictions were coming out more than once a week at one point,” says Garellek. 

Despite the numerous economic challenges faced by financial institutions due to the pandemic, some have also benefited from new opportunities. 

Throughout the crisis, the Financial Services Regulatory Authority of Ontario has been very active in responding quickly to market changes and issuing guidance to the financial services sector in the province. Supporting businesses and making sure that there is a viability for each sector has been a priority together with protecting consumers and plan beneficiaries. Extensions to regulatory filings of financial statements were granted to pension plan administrators and beneficiaries, for example, while guidance surrounding access to federal emergency loans by businesses through regulated entities was also clarified.

“A lot of our work has been about trying to find the balance in making sure we’re doing things quickly and enabling our sectors to do what they need to do as well as protecting consumers during this uncertain time,” says Alena Thouin, corporate secretary and deputy general counsel at FSRA. “The role of the FSRA is to be there to make sure we’re providing financial safety, fairness and choice for Ontarians and to ensure that we are responsive to whatever economic changes occur.”

As legal departments are critical partners in the implementation of guidance and regulations, Thouin suggests that general counsel closely monitor changing regulations and sign up for FSRA newsletters.

“I’ve noticed that legal departments are taking on a more prominent role in terms of overall organizational response during these turbulent times, ensuring that whatever comes down from the regulators and the government is being introduced and properly operationalized within their organizations — particularly in regulated areas like financial services, insurance companies, banks and credit unions,” she says.

As global general counsel at Associated Foreign Exchange, Alice Abbott navigates the regulatory environment by focusing on internal communication to keep on top of regulatory enquiries and subpoenas that are arising at AFEX — a provider of global payment solutions. 

“It’s really about making sure that our compliance partners and our operations partners and finance communicate freely with legal so we can get a sense of where the focus is because, as a global company, it’s hard to stay on top of everything that’s written,” says Abbott. “Really, the most useful thing is to start reading the internal tea leaves to get a sense of where the regulators are going.” She also relies heavily on external counsel partners. 

At Vancouver-based credit union Coast Capital Savings, meeting major provincial regulatory changes relating to the Canadian Deposit Insurance Corporation and the federal Financial Consumer Protection Framework are key priorities for Lisa Skakun, general counsel and chief corporate development officer. Skakun and her legal team also closely monitor developments relating to privacy and data protection and the development of open banking and payments modernization in Canada. Skakun says the FCPF is well aligned with Coast Capital’s objectives as a member-focused organization. While she welcomes the measures created to protect Canadians, she says certain aspects of the new regulations have posed capacity restraints for the team.

“Increased regulatory oversight and the increase in information requests does pose a practical issue around resourcing,” says Skakun. “The COVID-19 pandemic drastically shifted the way everyone operates. Layer on top of that new requests for information, different timelines, new products and new ways to service customers.”

Ensuring the legal team is seen as a strong business partner that delivers regulatory expectations and protects the organization is also at the top of Skakun’s list, together with breaking complex rules down and putting them into a clear and simple document.

“How do we take something that is intimidating for non-lawyers and make it tangible and relevant to the organization? It’s important that the legal team understands regulatory expectations, but you’ve also got to be able to engage with the business to ensure that the regulatory environment is captured in the front and back office,” she says. 

Coast Capital’s legal team partners closely with business units and the compliance team to ensure that the organization is effectively managing regulatory risks.

“On large projects, we do our best to be true business partners and embed ourselves into projects to ensure that we are compliant by design and not as an afterthought,” says Skakun.

In the year ahead, she anticipates seeing further development of the open banking framework, payments modernization and the implementation of the FCPF.

Garellek agrees that the pandemic may expediate the rise of an open banking environment in Canada and more technological solutions for consumers. 

“I think we will definitely see policy development start to ramp up again in the fall on the consumer side,” he says.