Canada’s Financial Rules May Be Holding Growth Back

October 16, 2025 – Canada’s weak growth, low investment and lagging innovation point to the need for a more modern regulatory philosophy that balances both protection and progress, according to a new report from the C.D. Howe Institute.

In “Pruning the Rulebook: Canada’s Financial Regulatory Scorecard, Year Two,” Gherardo Caracciolo’s updated findings revealed similar results to last year's scorecard: despite mounting economic challenges, Canada’s regulators have largely maintained the same priorities. He finds that consumer protection and financial stability continue to dominate, while competition and innovation remain secondary concerns.

“In Canada, 92 percent of regulatory initiatives focus on market stability, transparency, and consumer protection, while only 14 percent target efficiency, growth, or innovation,” said Caracciolo, C.D. Howe Institute Fellow-in-Residence. “Some agencies are making efforts to close this gap, but it’s clear more balance is needed.”

The report highlights how countries like the United States, the UK, and Australia deliberately embed economic dynamism and efficiency among their regulatory goals. Canada’s more protection-focused approach reveals a sharp contrast, reflected in the administrative burden and steadily rising compliance costs faced by businesses.

“Nearly one in every five payroll dollars now goes toward meeting regulatory requirements,” Caracciolo noted. “That may be sustainable for big institutions, but for smaller firms, it’s a real barrier to growth.”

The scorecard calls for modernizing Canada’s regulatory mandates to balance stability and consumer protection with growth, competition, and efficiency, bringing practice in line with international standards. It also urges regulators to require transparent, upfront cost-benefit analyses of new rules, ensuring that regulations are evaluated not only for their safeguards but also for their economic impact. Together, these steps would create a more adaptive framework that can help improve overall economic resilience and support long-term stability.

Read the Full Report

For more information, contact: Gherardo Caracciolo, Fellow-in-Residence, C.D. Howe Institute; and Raquel Schneider, Communications Officer, C.D. Howe Institute, 647-805-3918, rschneider@cdhowe.org.

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

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