2016 Annual Report on Financial Institutions - Financial sector posts steady growth while adapting to change

Organization Insurance Deposit institutions

Montréal – On June 15, 2017, the Autorité des marchés financiers (the "AMF") released its 2016 Annual Report on Financial Institutions (Complete version available in French only), which presents an overview of the financial sector as well as various economic, technological and environmental issues faced by market players. It also sets out the actions undertaken by the AMF to effectively address those issues in co-operation with stakeholders.

"The 2016 annual report is the result of concerted work performed by the AMF based on its in-depth understanding of the market and the statutory disclosures made by financial services cooperatives, trust companies, savings companies, insurers of persons and damage insurers carrying on business in Québec," said Louis Morisset, AMF President and Chief Executive Officer. "This report provides a financial overview of each industry as well as statistics to help assess the financial condition and scope of operations of financial institutions, excluding banks. The AMF has ratcheted up transparency by publishing the solvency ratios of individual insurance companies for the first time."

Financial sector growth

In 2016, Québec's financial sector enjoyed steady growth while pursuing its transformation.

The finance and insurance industry, including banks, represents 6.5% of Québec's gross domestic product (GDP), a contribution of $20.7 billion to the province's economy. This industry grew by 3.9% in 2016Figures provided by the Institut de la statistique du Québec.

Increasingly diverse issues

On the macro-economic level, the Bank of Canada maintained its policy interest rate at an accommodative level to help boost economic growth and investment. This key variable was still an important strategic and operational challenge in 2016, prompting institutions to be agile and prudent and, in some instances, to modify their investment portfolios, withdraw certain products or create new ones.

The rise in household debt remains a central concern of the AMF, which recently announced the forthcoming release of a new guideline on sound lending practices This link will open in a new window centred on the fair treatment of consumers. In addition, the AMF is constantly monitoring changes in the real estate market as associated volatility could impact Québec's financial system.

Technological issues pose significant challenges to all market players. Although the development of new technologies constitutes an opportunity for businesses and helps meet growing consumer interest, it contributes to the emergence of new risks. In light of developments in fintech and the sharing economy, the AMF is working with market stakeholders and government authorities to ensure optimal oversight while continuing to adequately protect consumers who want to take advantage of the innovations at their disposal in a safe and secure manner. In this respect, the AMF established a Fintech Working Group whose steering committee co-ordinates the work of the Technological Innovation Advisory Committee, Fintech Lab and various special projects. The AMF also chairs and contributes to the regulatory sandbox launched by the Canadian Securities Administrators.

Environmental issues, particularly those related to natural catastrophes and climate change, attracted much attention from the damage insurance industry in 2016. Given the increasing magnitude of these events, the AMF has made this a key issue as part of its 2017-2020 Strategic Plan (pdf - 4 MB)This link will open in a new windowUpdated on May 29, 20172017-2020 Strategic Plan.

Lastly, the AMF continues to work with national and international organizations and regulators in order to maintain a co-operative dialogue with all concerned parties. In this regard, the AMF plays an active role within the Canadian Council of Insurance Regulators, the International Association of Insurance Supervisors and the International Association of Deposit Insurers. Its main work, which is summed up in the annual report, contributes to maintaining a prudential framework in Québec that meets the highest standards.

The Autorité des marchés financiers (the "AMF") is the regulatory and oversight body for Québec's financial sector.

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