The Department of Finance Canada has launched a review of the financial services sector’s oversight on Friday, citing emerging risks such as climate change, cybersecurity threats and the rise of financial technology (fintech) as concerns facing the industry.

The first part of what is to be a two-stage review of legislation and regulation in the financial services sector involves setting the scene, enumerating trends and seeking feedback on areas for potential reform. This will then inform a second consultation paper that’s due to be published in 2017 actually proposing reforms.

The initial consultation paper indicates that “[f]inancial [services] institutions are facing an array of new and emerging risks, including catastrophic risks, that have a low probability of occurring and yet could result in high potential losses.”

Various factors, including increased urbanization, terrorism and climate change “have increased the potential for losses from catastrophic events,” the paper says.

The Finance Canada paper also notes that cybersecurity threats are a “growing concern” for both the government and the financial services sector: “Fears over the theft of personal information, financial loss and compromised individual privacy can erode consumer trust and confidence in the marketplace.”

At the same time, the Finance Canada paper also notes that trends such as the rise of fintech may also pose challenges to the industry and policy-makers in the sector.

“While fintech companies are creating the potential for more innovation and competition in the financial services sector, concerns have been raised regarding appropriate regulation of fintech companies, consumer protection, and how best to support a level playing field with regulated financial institutions,” the paper states.

In the 2016 federal budget, the federal government extended the sunset date for existing financial services sector legislation and regulations by two years until 2019 to allow this review process to play out. Comments on the initial paper are due by Nov. 15.

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