Rethinking Government Ownership of Alberta’s Financial Institutions - Part 3

Alberta’s financial services sector is built on a patchwork of regulators and provincially owned financial institutions that were created to fill market gaps decades ago. Those institutions once served a purpose, but the system is now outdated. It limits competition, discourages innovation and reduces the dynamism that a private financial sector could bring. If Alberta wants to diversify its economy and attract more investment, it must modernize its financial institutions and the rules that govern them. 

Privatization alone, though, is not enough. This paper, the final installment in a three-part series, argues that Alberta also needs a modern regulatory and institutional framework to encourage competition and innovation while maintaining public confidence in the province’s financial system. 

The first paper in this series examined how Alberta’s regulatory environment expanded the role of Government of Alberta-owned financial institutions. Restrictions on private-sector participation created market gaps that Alberta’s governments filled. These institutions then became permanent market participants, often operating with lower return expectations and less market discipline than private competitors. Instead of correcting market failures, this system has reinforced them. 

The second paper offered a roadmap for transferring these institutions to private ownership. Privatization would give banks, credit unions, insurers and other such firms a larger role in meeting the financing needs of Alberta businesses. This third paper builds on that foundation by proposing three reforms to support a stronger private system. 

First, Alberta should consolidate its several regulatory bodies into a single provincial regulator to simplify oversight, reduce duplication and provide consistent supervision across the financial sector. The regulator would also address longstanding concerns raised by the Office of the Auditor General of Alberta about weaknesses in oversight, accountability and risk management among Government of Alberta-owned financial institutions. 

Second, Alberta should establish a deposit guarantee program for provincially regulated deposit-taking institutions. Providing full protection for retail, business and Government of Alberta deposits, backed by a deposit insurance fund equal to about 1.5 per cent of insured deposits, would strengthen depositor confidence, provide liquidity during financial downturns and  allow Alberta-based institutions to compete on a more level playing field with federally regulated competitors.

Third, Alberta should create an apex bank to strengthen the province’s financial market infrastructure. Instead of competing with commercial lenders, an apex bank would provide wholesale banking services, support payment and settlement systems, manage the Government of Alberta’s financial instruments and administer insurance programs. By improving market infrastructure and applying market-based risk pricing, an apex bank would make Alberta’s financial system more efficient, competitive and resilient. 

Together, these reforms would replace Government of Alberta ownership with stronger market institutions and a better regulatory framework. Privatization, supported by regulation and robust financial infrastructure, would encourage private investment, improve capital allocation and spur innovation across Alberta’s financial services sector. This would give Alberta the opportunity to be a leader in financial liberalization across the country by building one of Canada’s most competitive, market-oriented financial systems.

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.