The government introduced legislation to allow non-Canadian banks to open commercial branches in the country, conforming with practices in most other industrialized nations.
The change is the first to overseas banking regulations since 1980 and it is aimed partly at reversing a decline in non-Canadian banks' share of total banking sector assets to 10% this year from 12% in 1990.
Finance Minister Paul Martin first announced plans to change the rules in February 1997. Today's proposed legislation follows his December ban on proposed domestic bank mergers on competitive grounds.
"A strong and competitive foreign bank sector" best serves Canadian consumers because the new legislation will give non-Canadian banks "greater flexibility and remove unnecessary regulatory obstacles," International Finance Minister Jim Peterson said as he introduced the proposed law.
Currently, overseas banks that want to set up businesses in Canada have to establish separate Canadian subsidiaries.