Appearance before the Standing Senate Committee on Banking, Trade and Commerce to examine and report on the potential benefits and challenges of open banking for Canadian financial services consumers, with specific focus on the federal government’s regulatory role

May 9, 2019
Ottawa, Ontario

Opening Statement by Gregory Smolynec
Deputy Commissioner, Policy and Promotion

(Check against delivery)

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Good afternoon Chair.  Thank you for the invitation to reappear before the Committee. I am once again accompanied by Arun Bauri, Senior Policy Analyst.

Introduction

This Committee has heard from a number of witnesses on the advantages associated with Open Banking but also of the potential risks.

When we first appeared before you in February, we recommended that Open Banking in Canada be built upon a foundation that includes respect for privacy and other fundamental rights at its core.  Specific recommendations we made included that:

• express meaningful consent be obtained from consumers;
• both technical and privacy standards be developed to ensure consistent ground rules;
• companies be accredited or licensed before being authorized to participate;
• PIPEDA be reformed to provide the OPC with stronger enforcement powers, including the power to make orders, impose fines for non-compliance with the law, as well as the right to independently verify compliance, without grounds, to ensure organizations are truly accountable for protecting personal information.

Since then, we have followed the hearings with great interest and noted that many comments echoed a number of the recommendations we made during our last appearance. We also participated in one of Finance Canada’s roundtables as part of their cross-country consultations on the merits of open banking and found that there was widespread agreement in the viewpoints of many participants. Though there was admittedly not 100% agreement on these points, common ground included the need for consent, strong privacy laws and standards to be developed.

On the matter of enhanced regulation I will also note that the Managing Director of the International Monetary Fund, Christine Lagarde, recently warned that innovation in the banking sector needs to be accompanied by regulation in order to maintain stability and trust in the system.

Additional Comments

Regulatory Oversight

You heard from witnesses on the Australian Open Banking model, which has incorporated complementary regulatory roles for both its Competition and Privacy regulators.

Our office currently does not have the ability to cooperate and share information with other regulators, such as the Competition Bureau, which can lead to gaps in enforcement when there is overlap in our mandates.

Any reform to PIPEDA to facilitate Open Banking should address this current gap so that we can work together with the Competition Bureau and any other regulators that may be involved. Limitations in our ability cooperate on common investigations could potentially hamper the effective and efficient implementation of Open Banking, putting at risk the confidence of Canadians to participate.

Meaningful Consent

As I mentioned, we noted the strong call from witnesses that appeared before you for individuals to be able to expressly consent to participate in Open Banking. On this point, we were pleased to hear the comments of the senior official from Innovation, Science, and Economic Development - ISED - who spoke of the importance of the OPC’s Meaningful Consent Guidelines when looking at PIEPDA reform.

Commissioner Therrien provided recommendations for updating PIPEDA in this very way during his appearance before this Committee on Bill C-74. We do note that the Committee’s report on Bill C-74 specifically stated that “The committee feels that Canada’s privacy laws need to be updated and made consistent with global standards”.

To elaborate on this point, individuals should have the right to control their information, which includes being able to meaningfully consent to how their information is used and to whom it is disclosed. Providing Canadians with control in this manner will help to foster trust and assure them that they are not the “product” in Open Banking.

We hope that any recommendations from this study include PIPEDA reform on consent.

Rights Based Legislation

In following the testimony of witnesses that appeared before the Committee, we noted with interest the testimony of one witness on moving the privacy framework in Canada towards a rights based model. This is a matter we are currently seized with and which we believe is a current gap in the legislative landscape concerning privacy.

The rights of individuals who participate in Open Banking is a central issue both to this study but also to the digital economy as a whole. Commissioner Therrien has expressed concern that longstanding privacy rights and values in Canada are not being given equal importance within a new digital ecosystem that is eagerly focused on embracing and leveraging data for various purposes. Privacy is not a right we simply trade away for innovation, efficiency or commercial gain.

Concluding remarks

In closing, we thank the Committee for undertaking this very important study and providing us with the opportunity to appear again.

We look forward to reviewing the results of this study and of Finance Canada’s consultations on the merits of Open Banking.

If and when a decision is made to proceed with Open Banking in Canada we would be pleased to further engage with officials to discuss how to best incorporate privacy considerations into an Open Banking model. We would also be pleased to assist in the development of the necessary standards and of course to play a role in oversight.

Thank you and I will be happy to answer any questions.