Rethinking Government Ownership of Alberta’s Financial Institutions - Part 1

Canada’s financial sector reflects a persistent tension between market-based capital allocation and government intervention. Extensive regulation of privately owned financial institutions has contributed to real and perceived gaps in financial markets. In response, federal and provincial governments have created, owned and regulated government-owned financial institutions. In Alberta, these government-owned or controlled financial institutions include ATB Financial (ATB), the Agriculture Financial Services Corporation (AFSC) and the Alberta Enterprise Corporation (AEC), as well as entities that support and oversee the credit union system, including the Credit Union Deposit Guarantee Corporation (CUDG) and Alberta Central. This paper analyzes the historical rationale for this government ownership and evaluates how changing economic conditions have diminished that model’s relevance. The government’s continued participation in capital markets increasingly generates inefficiencies and competitive imbalances that undermine a dynamic, self-sustaining, private financial services industry. 

This paper advances a financial liberalization framework as the pathway forward. Financial liberalization is not synonymous with deregulation. Rather, it involves removing barriers that impede efficient capital flows and market competition while maintaining a well-regulated, market-oriented system. As one of the largest contributors to Canada’s economy, Alberta is well-positioned to sustain its economic advantages through a freer and more competitive financial services sector. The paper argues that meaningful liberalization requires reducing the province’s role in financial intermediation — most notably through privatization — paired with streamlined and modernized regulation. 

This paper, the first of a three-part series, analyzes the Government of Alberta’s portfolio of financial institutions, considering their function in the province’s financial services landscape. The second paper explores mechanisms for driving financial liberalization in Alberta, primarily through the path of privatization. The last paper of this series suggests that Alberta can lead the  way in Canadian financial liberalization by undertaking strategic regulatory reforms designed to support a free and competitive financial market. Together, these reforms aim to strengthen Alberta’s financial sector by improving capital allocation, reducing institutional barriers to competition and encouraging innovation. A modernized, market-oriented financial system will position Alberta for long-term economic leadership within Canada’s financial services landscape.

This paper is part of the Research Workshop Series. The Research Workshop Series contains reports of varying word counts that provide in-depth analysis of existing research and data on urgent policy issues OR the collected observations and insights from policy discussion events and conferences. They focus on extracting thoughts on policy problems from current subject-matter experts and are subject to a non-academic standard of review.