Rethinking Government Ownership of Alberta’s Financial Institutions - Part 2

Alberta can strengthen its financial sector and increase competition by privatizing its three largest financial Crown corporations. These institutions were created to address market gaps; however, circumstances have changed and government ownership is no longer justifiable. Alberta is a mature, high-income economy with access to domestic and global capital markets, yet the provincial government still plays a major role in financial intermediation. Such involvement distorts competition, weakens market discipline and exposes taxpayers to unnecessary financial risks. 

A phased privatization is the best option for ATB Financial (ATB), the Agriculture Financial Services Corporation (AFSC) and the Alberta Enterprise Corporation (AEC). Shifting them to private ownership would transfer financial risk from taxpayers to investors and allow the province to focus on its job as regulator rather than as a provider of capital. Strong regulation, consumer protection and deposit insurance would remain in place, so that privatization enhances market discipline without affecting financial stability. 

The process should be tailored to each institution’s circumstances. Public share offerings, strategic sales and mergers could work, depending on each organization’s mandate and commercial prospects. Profitable operations should be sold to maximize value, while business lines with limited commercial potential can be restructured or transferred so that essential services continue. Transitional measures, including golden shares, head office commitments and service agreements, can keep decision-making in Alberta, while also protecting the sector’s workforce and maintaining rural communities’ access to financial services. All proceeds from privatization should be deposited in the Alberta Heritage Savings Trust Fund. This would create a diversified, long-term investment to strengthen Alberta’s fiscal position and generate income. 

Canada’s economy is challenged by weak productivity growth, declining GDP per capita and persistent capital outflows. The government makes things worse by owning financial institutions because it discourages private-sector competition and reduces the efficiency of capital allocation. Publicly owned institutions provide lower cost financing to certain borrowers, but the greater economic benefits of a more competitive, innovative and market-driven financial sector would eventually outweigh those advantages. 

This paper is the second in a three-part series on financial liberalization in Alberta. The series outlines a framework for modernizing the province’s financial sector through privatization, regulatory reform and greater reliance on competitive markets. These reforms would improve capital allocation, foster innovation, strengthen Alberta’s fiscal sustainability and reinforce the province’s position as Canada’s leading destination for financial services and investment.

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.