Annexes

Annex 1: Switching costs and competition in banking

Economic theory: Why switching costs matter

Consumers face multiple costs when changing providers, including direct costs such as transfer-out fees, and indirect costs such as time, hassle, paperwork, and uncertainty. When these costs are material, financial institutions can acquire and then retain customers, which allows institutions to sustain margins from existing customers even when rivals offer better prices or quality. This mechanism is well established in the industrial organization literature on competition and switching costs.

Evidence from retail banking and consumer behaviour

Evidence from retail banking markets is broadly consistent with economic theory: switching rates tend to be low, consumer engagement is often weak, and market shares adjust slowly to differences in prices and service quality.

For example, the UK’s Competition and Markets Authority (CMA) conducted a retail banking market investigation that concluded that weak consumer engagement—driven by factors such as perceived hassle, difficulty comparing products, and limited attention—reduced the effectiveness of competition in personal current accounts and related services.

In that investigation, the CMA observed that:

• Many customers remained with the same bank for long periods
• Switching rates were low
• Banks with better prices or quality tended to gain market share only slowly

These patterns are consistent with consumers being insufficiently responsive to better offers. The CMA linked low engagement to multiple frictions, including the absence of a natural “trigger point” to review accounts, the effort required to gather and combine information, and perceptions that switching providers is burdensome.

Experimental evidence also suggests that information alone may be insufficient to overcome inertia when switching involves effort and hassle. In field experiments with UK savings-account holders, well-designed disclosures increased switching only modestly on average; interventions that reduced frictions—such as more prominent prompts—simplified steps, and timely reminders had larger effects, consistent with switching costs and attention costs being central constraints.

Similarly, behavioural research finds that consumers may procrastinate or avoid complex administrative tasks, place too much importance on immediate hassles relative to future gains, and exhibit status quo bias. These factors can make switching costs more difficult to overcome and may discourage consumers from switching, even when they are dissatisfied or could save money by doing so.

Annex 2: UK regulatory history

Background

This section outlines the key regulatory reviews, market studies and policy initiatives undertaken in the UK over the past 25 years to improve competition and consumer outcomes in the retail banking market.

The UK’s recent experience over the past 2 decades shows how high market concentration, low switching rates, and limited transparency can weaken competitive dynamics in retail banking. In response, policymakers and regulators in the UK introduced reforms to improve transparency, facilitate account switching, and promote greater competition. These reforms provide a useful point of comparison for understanding how market structure, switching frictions, and product transparency affect consumer choice, prices, and service quality. This annex is descriptive and does not evaluate the effectiveness of these measures or their applicability to the Canadian context.

Findings of key commissions and investigations, 1998 to 2013

UK Chancellor Gordon Brown commissioned an independent review of UK banking services in 1998. The resulting report, known as the Cruickshank Report,^{Footnote 1}   was published in 2000. On retail banking services, the Cruickshank Report found that:

• The supply of banking services to retail customers was highly profitable
• The chequing account market played a critical role in competition for other retail banking products and services
• The chequing account market was highly concentrated within the largest 4 UK retail banks
• Consumers perceived significant barriers to switching banking products, largely owing to the perceived time and inconvenience involved in switching account providers
• For markets to work effectively in the interests of consumers, it is vital that the costs and difficulties of switching chequing accounts are kept to a minimum
• Consumers faced substantial information asymmetries that limited their ability to understand the terms of their banking products and to make informed comparisons between providers
• Banks had no incentive to encourage switching, as consumers that are locked in to a provider tolerate higher prices than those who actively shop around and switch between providers

The UK Office of Fair Trading (OFT), a UK government department that was tasked with enforcing consumer protection and competition law, completed a market study on chequing accounts^{Footnote 2}  (known as personal current accounts or PCAs) in 2008. Key findings included:

• Banks viewed PCAs as a gateway through which they could sell other products as consumers often select financial products from their existing banks without shopping around
• The UK’s predominant “free-if-in-credit” (FIIC) account model—under which consumers generally pay no monthly account fees or charges for basic services—can nevertheless impose costs on consumers through foregone interest, as balances held in current accounts often earn little or no interest compared with alternative savings products
• Barriers to entry limited the ability of smaller banks to become effective competitors to their rivals
• The study highlighted low levels of consumer switching as a key barrier

The OFT study concluded with concerns that features of the market were not working well for consumers, including:

• limited transparency on fees, meaning consumers lack fundamental information needed to compare competing products
• complexity in the way fees are implemented
• a perception across a significant proportion of consumers that switching is both risky and complex

A follow-up paper in 2009 described the “pro-competitive virtuous cycle” replicated in Figure 1. It describes a process where, as consumers become more aware of the costs of their chequing account and more confident in switching to get better service, banks would need to offer more competitive products and innovative services to attract and retain customers.

The OFT explained that, through this process, more efficient firms will gain market share, which is good for consumer welfare and, by reducing costs, is good for broader economic productivity.

Figure 1: OFT’s diagram of the pro-competitive virtuous cycle in banking

Source: OFT. (2009). Personal current accounts in the UK: A follow-up report.

In 2010, in the wake of the 2008–2009 financial crisis, the UK government set up the Independent Commission on Banking (also called the Vickers Commission). It was established to consider structural and non-structural reforms to the UK banking sector to promote financial stability and competition.^{Footnote 3}

The Vickers Commission found most of the competition problems highlighted by the Cruickshank Report remained. It highlighted both supply and demand-side problems.

On the supply side, the PCA market had become more concentrated in the wake of the financial crisis, as several challenger banks had left the market, often through acquisitions.

On the demand side, the report highlighted high switching costs and opaque product comparisons with “remarkably low” PCA switching rates that were not accompanied by high levels of customer satisfaction with existing suppliers.

The Vickers Commission concluded that competition in UK retail banking was not working well, and made the following recommendations on competition:

• Market structure: Ensure that the expected independent entity resulting from the divestment of part of Lloyds Banking group’s retail banking operations (as required by the European Commission) would be an effective competitor in the PCA market
• Barriers to entry and expansion: Recommended the UK prudential regulators “review the application of prudential standards to ensure that prudential requirements for capital and liquidity do not unnecessarily limit the ability of new entrants to enter the market safely and to grow”
• Switching: Recommended that a chequing account redirection service should be established to smooth the process of switching chequing accounts for individuals and small businesses that would:
  • catch all credits and debits going to the closed account, including automated payments taken from debit cards as well as direct debits
  • be seamless for the consumer so that throughout the process they have complete, problem-free use of their banking services and are not inconvenienced by debits or credits going to the wrong account
  • last for at least 13 months, to catch annual payments
  • continue to send reminders and provide support to direct debit originators to ensure that they update their details for people who have switched accounts
  • guarantee that consumer will not suffer a loss if mistakes occur in the switching process
  • be free to the consumer
• Transparency: Recommended that the OFT and the Financial Conduct Authority (FCA) work with banks to improve transparency across all retail banking products, especially for chequing accounts.
  • Banks should provide data of the cost of their services for a sample of representative customer profiles to demonstrate potential costs and should provide price information in an accessible form in response to any reasonable request from a price comparison site
  • Banks should incorporate the interest customers could have earned on chequing account balances (relative to the central bank base rate) into annual customer statements
  • The FCA should consider other options for improving transparency for customers, including improving price comparison tools for chequing accounts, and developing comparison tools for non-price product characteristics

The FCA, established in 2013, is the UK’s current financial services regulator. It has 3 operational objectives set out in legislation:

• secure an appropriate degree of protection for consumers
• enhance the integrity of the UK financial system
• promote effective competition in the interests of consumers^{Footnote 4}

Barriers to entry and expansion

The Cruickshank Report and the Vickers Commission identified high barriers to entry and expansion as key obstacles to effective competition from new entrants to the banking system—especially for chequing accounts—that helped to sustain high market concentration among large incumbent banks.

The Vickers Commission recommended that the prudential regulators consider whether capital and liquidity requirements were unduly limiting the ability for new firms to enter the market. 

Regulatory sandbox to encourage innovation

The FCA introduced the “Regulatory Sandbox” in 2015, to promote competition by supporting disruptive innovation. ^{Footnote 5} The Regulatory Sandbox is a facility for firms to test innovative products and services. The Sandbox firms are subject to less strict prudential requirements and more flexible regulatory standards than would be required with a full market roll-out of the innovative products.

The Regulatory Sandbox aims to reduce time-to-market at potentially lower cost and improve firms’ access to financing by helping to reduce regulatory uncertainty, enabling more innovative products to reach the market. It also enables the FCA to work with firms to ensure appropriate consumer safeguards are built into their new products and services before reaching the mass market.

The Regulatory Sandbox borrows concepts from clinical trials, and the FCA works closely with Sandbox firms to develop a testing procedure. Sandbox firm customers have the same rights as customers who engage with other authorised firms. The Sandbox firms can only test their new products on customers who have given informed consent to be included in testing and are required to compensate any losses to customers resulting from the innovative product.

The FCA considers the Regulatory Sandbox has led to better outcomes for consumers through an increased range of products and services, reduced costs, and improved access to financial services. Research on the impact of regulatory sandboxes finds positive effects on fintech companies’ access to capital and long-term survival rates.^{Footnote 6}

Open banking reforms

Following a Competition and Markets Authority (CMA) investigation in 2016, the UK has adopted open banking requirements in financial services markets. In 2017, the 9 largest UK banks were required to adopt secure, standardised software protocols (application programming interfaces or APIs) to allow third-party firms to access their customers’ financial information.

The enabling of read-and-write capabilities for customer-authorised third-party firms increased the scope of innovative products and new entrants to provide financial services to consumers. 

According to the CMA, open banking is “widely recognised as a major success, with many other countries considering similar open standards,” which has helped to improve financial decision-making for consumers and drive down costs for small and medium sized businesses, boosting competition and innovation.^{Footnote 7}

Between 2013 and 2021, the combined market share of the UK’s “Big 4” banks declined from 77% in 2013, to 68% in 2018,^{Footnote 8}   to 64% in 2021. ^{Footnote 9}

Between 2018 and 2021, digital challenger banks significantly increased their combined market share from 1% to 8%; taking market share from the Big 4 banks as well as from larger, traditional challenger banks.^{Footnote 10}  As a result, the UK’s Big 4 banks continue to retain a high market share but face significant effective competition from challenger banks.

Switching

The Cruickshank Report and the Vickers Commission identified low switching rates and high switching costs for chequing accounts as a significant impediment for effective competition. The reasons identified for low switching rates included:

• significant consumer effort required to update account details with direct debit originators, their employer, and anyone else that makes payments into their existing account
• consumer risks from financial penalties and disruption from failed payments due to the incomplete or inaccurate updating of account information for all relevant payment senders and receivers
• a perceived lack of compelling alternatives to their existing account services 
• difficulties in consumers’ ability to compare chequing account costs and benefits

A 2006 Bank of England research paper found evidence indicating high switching costs in the UK personal chequing account market in which there was a positive relationship between levels of market share and price.^{Footnote 11}

This suggests that with high switching costs, each bank faces a trade-off between increasing profits by raising prices for its existing customers but losing some of its customer base and attracting fewer new customers. Each bank’s market share dictates how this trade-off is resolved: larger market shares incentivise higher prices (profits) when high switching costs exist.

Current Account Switching Service (CASS)

In 2013, the UK launched the Current Account Switching Service (CASS), which was intended to significantly reduce customer switching costs through a faster and more reliable account switching service.^{Footnote 12}  Under the CASS, it is the banks’ responsibility to ensure that account deposits are transferred, and direct debit details are fully updated for all payers and payees associated with the original account.

The CASS requires banks to automatically redirect payments sent to the original account for 36 months after the switch, with notifications of the new account details sent to the payer. The CASS requires banks to perform account switching within a 7-day window, and consumers are provided with a switch guarantee that fully protects them against any financial losses incurred in the event that a problem occurs during the switch.

Transparency

Effective competition requires that consumers can make informed decisions in a timely manner. The Cruickshank Report and the Vickers Commission identified poor customer information and product transparency as significant impediments for effective competition. Customers struggled to understand the costs of their financial products, and to compare between alternative financial products.

In 2012, the UK government encouraged the major banks to voluntarily agree to provide text alert services to warn customers when their chequing account balances are low. In 2015, the FCA found that there is a significant consumer benefit from the combination of receiving information from an automatic trigger and the facility to act quickly upon receiving it. It further found that text alerts and mobile banking apps also decrease average chequing account balances by 17% to 24%, which reduces the forgone-interest cost to the consumer of holding significant balances in zero (or low) interest chequing accounts.^{Footnote 13}

In 2023, the FCA introduced the Consumer Duty^{Footnote 14}  (the Duty), which sets the standard of care that firms must provide to customers in retail financial markets. The Duty requires firms to proactively act to deliver good outcomes for retail customers. It includes a series of expected market outcomes that firms must deliver:

• The products and services outcome requirements aim to ensure that products are designed to meet the identified target customer’s needs and objectives
• The price and value outcome aims to ensure the price the customer pays for a product or service is reasonable compared to the overall benefits of the product to the customer
• The consumer understanding outcome requires firms to communicate information about the product or service that is clear, fair and not misleading to meet the needs of the intended target customer
• The consumer support outcome requires firms to provide intended target customers with sufficient support to realise the benefits of the products and services they buy, pursue their financial objectives and ensure that they can act in their own interests ^{Footnote 15}

The FCA has found that the Duty has led to firms delivering better outcomes for consumers in retail financial markets, as well as identifying areas where ongoing improvements are required.^{Footnote 16}  For example, the FCA notes that it has seen firms updating pricing models, reducing or removing charges for certain products, putting in controls for certain customer groups, and capping fees or removing fees entirely where firms could not justify the product’s cost. The FCA does acknowledge that some firms must continue to improve to meet the standards set by the Duty.

Annex 3: Demand for cash and Canada’s ATM network

Cash continues to play a role in Canada, even as digital payment methods expand. According to the Bank of Canada, cash usage at the point-of-sale has remained relatively stable since 2020, accounting for approximately 20% of transactions by volume, and 10–12% by value between 2020 and 2024.

ATMs remain the primary channel for accessing cash, exceeding both bank branch withdrawals and cashbacks (i.e., cash withdrawals at the point-of-sale using a debit card). In 2024, approximately 32% of respondents to the Bank of Canada’s Methods-of-Payment Survey reported making ATM withdrawals, compared to 8% who withdrew cash at a branch and 6.3% who obtained a cashback at retail locations.

Canadians conducted approximately 385 million ATM transactions in 2023, representing a 16% decline from about 456 million transactions in 2019. Despite this decline in volume, the total value of ATM withdrawals increased by about 22%, from $67 billion in 2019 to $82 billion in 2023. This suggests that Canadians are making fewer but larger ATM withdrawals.

Branch closures and the ATM network

Canada’s ATM network consists of both ATMs that are owned by a financial institution and privately owned-and-operated (white‑label) ATMs.

Between 2019 and 2022, the total number of ATMs increased modestly from 60,568 in 2019 to 62,805 in 2022 (+3.7%). This growth was observed across both segments:

• bank-owned ATMs increased from 20,249 to 20,938 (+3.4%)
• white-label ATMs increased from 40,319 to 41,867 (+3.8%)

Over the same period, the number of bank and credit union branches declined from 8,895 in 2019 to 8,436 in 2022 (-5.2%), with a more pronounced decline in rural areas (-7.2%).

The expansion of the ATM network has helped maintain access to cash despite the decline in physical branches, but this growth has not kept pace with—or offset—the reduction in branch access. Moreover, more than half of this growth has been driven by white-label ATMs that carry higher fees for consumers.

Annex 4: Overview of the European Commission’s Directive 2014/92/EU: Annual Statement of Fees

Directive 2014/92/EU,^{Footnote 17}  adopted by the European Parliament and Council, establishes EU-wide rules to improve transparency and comparability of payment account fees.^{Footnote 18}

Prior to Directive 2014/92/EU, consumers typically received fragmented, incomplete, or transaction-level fee information (e.g., monthly statements) that did not provide a clear overview of the total cost of holding and using a payment account over time.

The European Commission found that consumers lacked a consolidated view of the fees they actually paid, making it difficult to evaluate value for money or compare accounts based on real usage patterns. It concluded that ex ante disclosure (information that must be provided before a consumer enters into a contract) alone was insufficient to overcome information asymmetry and consumer inertia in retail banking markets.

Among other measures, the Directive requires payment service providers (including banks) to provide consumers, at least annually and free of charge, with an Annual Statement of Fees that summarizes:

• all fees charged for services linked to the payment account during the reporting period
• the total amount paid for each category of service

The Annual Statement of Fees is intended to provide consumers with a clear, standardised overview of all fees actually incurred over a defined period, enabling informed reassessment of a consumers’ payment account, and supporting effective switching decisions. This annual statement complements pre-contractual disclosures, by ensuring transparency through the life of a financial product or service, not only at the point of sale.

Expected effects

The Commission’s Impact Assessment^{Footnote 19}  identified the Annual Statement of Fees as a critical disclosure tool intended to support consumer awareness and decision-making, rather than solely to provide information. Its expected effects included:

• improved consumer awareness of cumulative costs, reducing underestimation of banking fees
• stronger incentives to switch accounts, based on real usage rather than hypothetical pricing
• increased competitive pressure on providers with high or complex fee structures
• reinforcement of internal market objectives, by making fee structures comparable across providers and Member States

Policy significance

By mandating a uniform, consumer-friendly annual summary of fees, Directive 2014/92/EU sought to strengthen transparency, support informed switching, and reinforce competition in the EU retail banking market.

The European Commission's 2025 review found broad compliance with the Statement of Fees requirements across Member States and reported that most national authorities considered the measure to have reduced consumer harm. However, the Commission concluded that more robust evidence would be needed to assess the extent to which the Statement of Fees has improved consumer decision-making, transparency, or competitive outcomes.

Statement of fees template

[Name of the account provider]

[Contact details of the account provider]

[Client name]

[Contact details]

This document provides you with an overview of all the fees for services linked to your payment account during the period shown above.

It also informs you about any interest you may have paid or earned during this time.

Information on individual transactions and account balance can be found on your account statements.

Summary of fees and interest

Detailed statement of fees paid on the account

Detail of the fees included in the package of services

Detail of interest paid on the account

Detail of interest earned on the account

Annex 5: Sample of prepaid payment products in Canada

¹The products listed are reloadable, except those marked with an asterisk.

Annex 6: G20/OECD High-Level Principles on Financial Consumer Protection and World Bank’s Good Practices for Financial Consumer Protection

The G20/OECD High-Level Principles on Financial Consumer Protection provide internationally recognized guidance on financial-consumer protection. Included under Principle 7 (Disclosure and Transparency):

• Financial institutions should provide consumers with key information about a product’s benefits, risks, and terms in a way that supports understanding and comparison
• Financial institutions should provide information on conflicts of interest associated with the intermediaries through which the product is sold
• All promotional material should be accurate, honest, understandable, transparent, and not misleading
• Standard pre-contractual disclosure practices such as forms should be adopted where possible to allow comparisons between products and services of the same nature
• Specific disclosure mechanisms such as warnings should be developed to provide information commensurate with the complexity and riskiness of products and services

The World Bank’s 2017 Good Practices for Financial Consumer Protection outline a set of best practices for disclosure and transparency across various financial products and services, including deposit and credit products and services, insurance, private pensions, securities, retail payment services, and credit reporting systems. It is a summary that focuses on practices related to deposit accounts. Best practices for retail payment services are broadly aligned with the components outlined below.

Format and manner of disclosure

This component addresses how information is presented, including writing style, timing, and use of visual elements:

• Communications should be in plain and easily understandable language
• Written communications should use font size, spacing, and placement that are easy for the average person to read
• Documents should be provided in a written form that can be kept or saved
• Key product or service features should be clearly highlighted
• The regulatory framework should specify the timing of key disclosures
• Regulators should define standardized methods for calculating total cost and total net return
• Communications should disclose the regulatory status of the financial service provider and provide contact details for internal and external complaint-handling mechanisms

Advertising and sales materials

This component establishes minimum standards for promotional materials:

• Advertising and sales materials should not contain misleading or false information, or omit information that is important to a consumer’s decision to purchase a product or service
• Financial service providers should bear legal responsibility for all representations made in advertising and sales materials

Disclosure of terms and conditions

• Terms and conditions should include:
  • the financial service provider’s regulatory status
  • the rights and responsibilities of consumers, including termination conditions
  • the rights and responsibilities of the financial service provider
  • all applicable interest rates, costs, fees, and charges (including from third parties) that might arise, when they can be applied, and how they are calculated
  • how and when terms and conditions can be altered unilaterally by the financial service provider
  • whether and how consumers will be notified of changes to terms and conditions
  • penalties and other remedies that the financial service provider may seek to impose in the event of a breach of the agreement by the consumer
  • contact information for the financial service provider’s customer service
  • information and contact details relating to internal and external complaint-handling mechanisms
• A printed or electronic copy should be provided
• The regulatory framework should require specific disclosures based on the type of product
• Financial service providers should use Key Facts Statements (see below)
• Financial service providers should explain key terms orally on request

Key Facts Statements

Financial service providers should be required to produce Key Facts Statements that summarize the main characteristics of common retail deposit accounts. Minimum standards for Key Facts Statements include that they should be:

• concise (1–2 pages) and written in plain language
• based on a standardized format, content and formulas

Key Facts Statements should be signed by consumers and should be given prominent placement when attached to an agreement.

Written account statements

Financial service providers should provide periodic written account statements free of charge.

Statements should list all transactions (dates and values), opening and closing balances, interest rates, fees, and penalties. This information should also be available to consumers upon request.

A final statement should be issued when an account is closed.

Notification of changes

• Financial service providers should provide advance notice of changes to:
  • interest rates
  • non-interest charges
  • other key product and service features or previously agreed-to terms and conditions
• Financial service providers should notify consumers when their accounts become inactive or dormant
• The length and format of a notice should be determined by the nature of the change and its impact on the consumer
• If revised terms and conditions are not acceptable to a consumer, regulatory conditions should guarantee the consumer’s right to exit the agreement without penalty

Annex 7: Effectiveness of disclosure and limitations

In 2019, the Australian Securities and Investments Commission (ASIC) and the Dutch Authority for the Financial Markets (AFM) published a joint report on the effectiveness of disclosure and its limitations.^{Footnote 20}  The report uses case studies in a variety of financial markets, including Australia, the Netherlands, and other jurisdictions.

The report’s case studies suggest that while mandatory disclosure remains an important component of consumer-protection frameworks, it does not consistently result in consumers being well informed, nor does it always lead to better consumer outcomes on its own. The report identifies several factors that can limit the effectiveness of disclosure:

Financial markets are inherently complex, and simplifying disclosures does not eliminate this underlying complexity.

Consumers receive information from many sources that compete for their attention and influence decision‑making. Disclosures themselves add to this competition for consumers’ attention.

Standardized disclosure requirements apply broadly, while consumer behaviour is shaped by individual circumstances and contextual factors.

Warnings, while widely used, do not always improve understanding of risks or influence behaviour as intended.

In some cases, disclosure may have unintended effects that do not improve outcomes for all consumers.

Complexity of financial markets

Decisions about financial products are often complex, and financial service providers may structure products, pricing, and processes in ways that add to this complexity. Examples include product and price bundling, opaque discounts, unclear fee descriptions, and design features that make switching more difficult.

In this context, efforts to simplify disclosures can involve trade‑offs. While clearer language can improve accessibility, simplification may also risk omitting information that could be relevant for some consumers. In many cases, simplification addresses how information is presented rather than the complexity of the underlying concepts, which may still require a level of financial knowledge to interpret.

Limited attention

Only a minority of consumers pay attention to disclosure documents. Many consumers report that disclosure documents are long, complex, and use difficult and technical language. Other consumers report that these documents did not provide relevant, actionable information and that they have to skip large parts of the documents to find what they consider to be relevant.

Financial service providers also influence how consumers engage with information. Advertising, marketing, and the design of choice environments may draw attention away from disclosures or encourage quick decision‑making. Timing and presentation of offers may further reduce the likelihood that consumers will focus on disclosure content.

Contextual factors

Consumers differ in their decision‑making styles, information needs, and sources of advice. The context in which information is provided—including the delivery channel, physical or digital environment, and the consumer’s emotional state—can affect how information is received and used. As most disclosures are standardized, they may not fully reflect these differences or meet the needs of all consumers equally well.

Unexpected outcomes

In some situations, disclosure can influence behaviour in unexpected ways. For example, disclosure of conflicts of interest may increase trust rather than prompt caution, or information about minimum repayment amounts may lead some consumers to repay less than they otherwise would. These outcomes highlight the importance of considering behavioural responses when designing disclosure requirements.

The effectiveness of warnings

Warnings have become a commonly used regulatory tool, but their effectiveness can vary. Consumers may overlook or misunderstand warnings, particularly in environments where warnings and notifications are frequent. Over time, repeated exposure may reduce their impact, a phenomenon often referred to as “warning fatigue.”

Annex 8: Recent disclosure reforms to the investment market in Canada

The Canadian Securities Administrators (CSA) implemented reforms designed to strengthen investor protection by improving transparency, accountability, and investor understanding of investment costs, performance, and advisor relationships. The reforms respond to concerns about information asymmetries in the investment market, particularly around fees and compensation, and the difficulty investors face in understanding how costs affect returns over time.

Reforms were introduced in phases, with a first phase of changes—Client Relationship Model phase 2 (CRM2)—implemented between 2013 and 2017, and a second phase of changes—Client Relationship Model phase 3 (CRM3)—finalized in 2024 and coming into force in 2026. Together, the 2 phases of reforms represent a shift toward clearer, more personalized, and outcome-focused disclosure in Canada’s investment sector.

CRM2: Improving fee and performance transparency

CRM2 focused on enhancing the quality and usefulness of the information investors receive from their dealers and advisors. Key elements included:

• Annual charges and compensation reports, requiring firms to disclose, in dollar terms, the direct fees and compensation paid by customers to their dealer or advisor over the year
• Enhanced performance reporting, requiring personalized annual and quarterly reports showing account-level returns using standardized methodologies
• Improved relationship disclosure, clarifying the nature of the client–advisor relationship, including account types, services provided, and suitability obligations

The objective of CRM2 was to help investors better understand what they are paying, how their investments are performing, and what services they receive in return. Evaluations found that CRM2 improved fee awareness, understanding, and investor engagement over time. Some evidence also pointed to behavioral responses, including increased discussions with advisors, shifts toward lower cost products, and changes in fee structures within the industry.

At the same time, regulatory reviews identified limitations. Not all investors noticed or engaged with the new reports, and some found them difficult to interpret or act upon, highlighting the persistent challenges of disclosure-based approaches.

CRM3: Closing key information gaps

CRM3, also referred to as Total Cost Reporting (TCR), seeks to address a critical gap: the lack of clear, investor-specific information on indirect fund costs, such as management expense ratios (MERs) and other ongoing fund expenses.

Under CRM3, firms will be required to report to investors, in dollar terms:

• the total amount paid in fund expenses across all holdings
• the total amount paid in direct charges, such as transaction or redemption fees
• the fund expense ratio (FER) for each investment fund
• comparable cost information for segregated funds, including insurance and guarantee costs

These disclosures must be personalized, clearly presented, and integrated into existing annual reporting. Investors are expected to receive their first CRM3 compliant reports for the year ending December 31, 2026.

Combined impact of CRM2 and CRM3

Taken together, these reforms represent an evolution in Canadian investment disclosure. The reforms move beyond abstract percentages and generic documents toward personalized, dollar-based reporting that makes costs more visible and comparable. While disclosure alone cannot eliminate complexity or guarantee better decisions, the CSA’s CRM reforms provide a stronger foundation for investors’ understanding, engagement, and informed choice. They offer important lessons for transparency initiatives in other financial sectors.

Annex 9: Overdraft fees

United Kingdom

In 2019, the UK implemented a comprehensive regulatory framework for overdraft fees. UK regulators identified persistent consumer harm arising from complex pricing, high charges for unarranged overdrafts, and repeated use concentrated among a small share of consumers. 

Key elements of the UK approach include:

• a requirement that banks charge overdrafts using a single interest rate; fixed daily or monthly overdraft fees are prohibited
• unarranged overdrafts cannot be priced higher than arranged overdrafts, eliminating penalty-style pricing for exceeding limits
• consumers are automatically enrolled in overdraft alerts when they enter into an overdraft agreement or are at risk of incurring charges
• banks must identify customers who use overdrafts frequently or persistently, and must proactively engage with them to help reduce reliance on overdrafts, including offering alternatives where appropriate
• banks must prominently publish representative annual percentage rate (APR) ranges and standardized overdraft pricing tables, updated quarterly

Post-implementation reviews by the UK Financial Conduct Authority found that these measures reduced overall overdraft costs and charges for consumers with low incomes or persistent overdraft use. The UK model places less emphasis on price caps and more on simplified pricing, comparability, and active intervention.

United States

In the United States, overdraft regulation has evolved through a combination of supervisory guidance, enforcement actions, disclosure requirements, and market-driven reforms, rather than comprehensive federal price controls.

Beginning in 2015, large banks were required to report overdraft and NSF fee revenue.

Between 2019 and 2023, the Consumer Financial Protection Bureau (CFPB) publicly raised concerns about overdraft fee practices through supervisory examinations, enforcement actions, and research publications. The CFPB found that overdraft fee revenue fell by roughly $4 billion from 2019 to 2023 at financial service providers with more than $1 billion in total assets.

In 2023, the Office of the Comptroller of the Currency (OCC) issued a bulletin highlighting compliance, operational and credit risks associated with overdraft protection programs, including practices such as charging multiple fees on re-presented payments and high limits or lack of daily limits on the number of fees assessed.

In 2024, the CFPB introduced a new rule requiring financial service providers with more than $10 billion in assets to treat overdraft services as a form of credit, with full consumer credit protections unless the overdraft fee is $5 or less or only covers the provider’s actual costs and losses.

Annex 10: Market scans of chequing accounts in Canada

Information in this Annex reflects publicly available information as of August 31, 2026. Of note:

• Values may change for account holders who meet certain criteria (e.g., fees may be lower for students, seniors, etc.)
• This annex does not contain a comprehensive list of all available personal deposit accounts; it is limited to personal chequing accounts denominated in Canadian dollars that are available for sale to all consumers (i.e., does not include grandfathered or legacy products)
• This annex does not contain a comprehensive list of all account features, and certain omitted features could explain price differences
• Some institutions may use a relationship-based model or offer other promotions to waive or reduce certain fees
• Some accounts may have separate limits for digital/online/self-serve transactions versus in-branch transactions
• Excess transaction fees, while usually $1.25 each, may vary by transaction type at some institutions. Additionally, some institutions offer unlimited transactions for certain types of transactions (e.g., public transit purchases)
• ATM fees reflect the cost of domestic cash withdrawals only. Institutions that are part of THE EXCHANGE Network may not charge a fee to consumers using other ATMs on THE EXCHANGE Network, even if the ATM is owned by another financial institution.