Regulating Finance to Promote Growth: The Quebec Experience in Perspective

While financial regulation is meant to promote stability, it is just as important for it to promote growth, development and competition in the financial sector, something Quebec has been focussed on since the 1960s. This paper provides a brief history of Quebec’s financial legislative and regulatory policies from the 1960s to now. Quebec’s views on financial regulations are tied to the idea that a competitive market, stable financial institutions and protecting financial product consumers are key factors to building an effective and sustainable financial system. This paper looks at how Quebec has responded to federal regulatory changes to ensure Quebec-owned financial institutions remained successful and competitive compared to federally licensed institutions, how Quebec adapted to the deregulation reforms of the Canadian financial system and, finally, the adoption of a unified financial regulator. Quebec’s adoption of a unified agency model of financial regulation, which most other Canadian provinces do not have, provides an opportunity to examine and compare which policies and regulations have been most effective, what role the unified agency model played and how the unified agency compares to other regulatory regimes adopted by other Canadian provinces. One of the key factors to successful financial regulation is the ability to keep up with the rapidly changing financial business and services, including regulatory standards nationally and internationally. Canada’s financial regulatory system is shared between the federal and provincial governments. Federal and international regulations tend to force provincial regulations to converge, resulting in harmonized financial practices. Quebec’s goal was to promote Quebec-owned financial institutions, strengthening Montreal’s position as an international financial centre. Montreal is 27th in the top 100 global financial centres. How did Quebec’s financial regulation evolution and current model perform? Rapid technological advances can pose a variety of challenges for provincial financial regulations, including the large investments needed to keep up with technology, a flexible regulatory process that can keep up to the rapidly changing market dynamics and the ability to create legislation to protect consumers and monitor market conduct. Quebec’s unified model, while having some quirks, is able to address many of these challenges. The use of private bills to accelerate and customize the legislative process has been a key factor in giving financial institutions the leeway and flexibility to deal with some of these expected challenges. The government’s confidence in the unified agency to supervise the restructured financial institutions, along with Quebec’s consistency in its financial regulations, regardless of the political party in power, has also contributed to the province’s success.