Bank of Canada senior deputy governor Carolyn Rogers says fostering competition in the

Canadian economy is a powerful tool for boosting productivity, including in the country’s financial sector.

“Greater contestability, more new entrants and more innovation in our financial sector would lead to competition that’s good for consumers, for productivity and for our economy,” said Rogers, during speech in front of the Canadian Club Toronto. “We should lean into it.”

Canada’s productivity slump has long been a subject of focus for policymakers and economists. Just last year, Rogers delivered a speech in Halifax calling Canada’s productivity problems “an emergency.” Canada’s

trade war with the United States has only reinforced the urgent need to fix the problem, as productivity declined by one per cent in the second quarter, the steepest quarterly decline in three years.

“Higher productivity won’t make Canada immune to U.S. trade policy, but it would help buffer the effects of tariffs,” said Rogers. “And it’s the clearest path to boosting real wages, making life more affordable.”

Competition is one area the deputy governor points out, that can force firms to be more efficient, more innovative and attract more investment.

“We like our hockey analogies these days, so you could think of it this way: you always skate a little harder in the game than you do in practice,” said Rogers. “And when the game starts, the tougher the opponent, the harder you skate.”

The financial sector consists of six key players that collectively hold about 93 per cent of all banking assets. While Rogers said this concentration has contributed to Canada’s financial stability, it also should not be taken for granted.

“However, many argue that this level of concentration has clear negative impacts on productivity, innovation, capital allocation, cost and consumer choice,” she said.

Rogers points to recent announcements in the U.S. to reduce regulations in their financial sector and recent comments by the United Kingdom’s Chancellor of the Exchequer Rachel Reeves who ccalled regulation a “boot on the neck of business.”

Recent reforms on the horizon for the financial sector include open banking, which will empower consumer choice by shifting control of financial data over to consumers. Real-time rail, a project that will modernize the payments system, will make real-time payments faster and give more firms direct access to the payments system.

“The experiences of countries that have already introduced instant payment systems show that these systems have real benefits,” said Rogers. “And a study last year by the

C.D. Howe Institute estimated that Real-Time Rail could deliver more than $3 billion in efficiency gains to Canada’s economy over its first five years.”

This could also apply to other “network sectors” of the economy, meaning sectors that serve everyone, like transportation,

telecommunications and energy. Rogers noted it’s important to get the balance right, as competition can have drawbacks as well, like low investment after an optimal point, leaving vulnerable populations behind or increased risk of fraud or predatory practices.

“An economy with too little competition will lag in innovation and efficiency and struggle to attract investment,” said Rogers. “An economy with too much competition can also have underinvestment and is more likely to experience instability and market failures.”

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Rogers said fostering competition will have its trade-offs, but policies that balance competition must adapt.

“If policies designed to balance competition don’t change as needed, they will create or exacerbate negative outcomes for consumers — and for productivity,” she said.