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Regulated Alternative Lenders Are Not Private Lenders: Why CAMLA Says Canada's Non-Bank Rules Must Split the Category
Regulated Alternative Lenders Are Not Private Lenders: Why CAMLA Says Canada's Non-Bank Rules Must Split the Category
When OSFI published its 2025 Financial System Review, it used the term "non-bank lending sector" 47 times. Mortgage Investment Corporations that report quarterly to provincial securities commissions got the same label as a dentist in Oakville syndicating second mortgages to three friends. The Canadian Alternative Mortgage Lenders Association is now telling regulators that distinction matters more than the shared label suggests.
The position paper released this year argues for a two-tier structure: regulated alternative lenders in one bucket, genuinely private arrangements in another. CAMLA represents MICs and trust companies already filing audited statements and meeting capital thresholds. A private lender might be a single high-net-worth individual placing a $400,000 loan with no reporting requirement beyond the mortgage itself. The organizations barely resemble each other except that neither takes deposits.
Why regulators grouped them in the first place
Non-bank lenders now hold 10 to 12 percent of the Canadian mortgage market. That share has grown as stress-test rules pushed more borrowers, self-employed, new immigrants, gig workers, away from the Big Six. From a systemic-risk perspective, OSFI sees anything outside the federally regulated deposit-taking framework as harder to monitor. The 2008 US crisis was built on non-bank originators securitizing loans they never held, so Canadian regulators spent the last decade watching for concentrated risk in entities they don't directly supervise.
The problem with that lens: Canadian MICs typically keep loans on their books and cap loan-to-value ratios between 65 and 75 percent. A private syndicate might go to 85 percent LTV on a second mortgage behind a first lien, layering risk the MIC wouldn't touch. One operates under audited financial controls and investor disclosure rules. The other operates under contract law and personal relationships.
What CAMLA is actually asking for
The paper doesn't argue against transparency. It argues that applying bank-style capital adequacy requirements to flexible B-lenders will push borrowers toward the unregulated side, the exact outcome regulators want to avoid. If a MIC needs to hold Basel-style capital buffers, its cost of funds rises and its rate premium (currently 200 to 500 basis points over prime) widens further. At some spread, borrowers stop choosing the transparent lender and go looking for the dentist with a line of credit and a risk appetite.
CAMLA's preferred split would let provincial securities regulators continue overseeing MICs while OSFI sets a lighter framework for lenders that don't take deposits and don't securitize broadly. Private lenders, those operating below a certain asset threshold and funding fewer than a set number of loans per year, would remain outside formal oversight but also outside the language of "shadow banking" that implies systemic importance.
The counterargument regulators won't drop
The Bank of Canada has pointed out that if several large MICs failed simultaneously, depositor confidence could crack even though MICs don't hold deposits. Investors who treat MIC shares like quasi-deposits might pull capital from other parts of the system. Rate sensitivity is higher in the alternative space because funding comes from private investors expecting double-digit returns, and liquidity dries up faster than in institutions backstopped by CDIC.
OSFI's likely position: drawing a clean regulatory line between a sophisticated private syndicate and a small MIC is legally messy. Exempting one category creates the gap that eventually gets exploited.
The actual trade CAMLA wants
The paper is a negotiation anchor. CAMLA knows some new oversight is coming. Publishing the two-tier proposal early lets them shape what "appropriate oversight" means before OSFI hands down a framework designed for deposit-taking institutions. The alternative lenders are betting that showing up with a specific, workable structure beats waiting for regulation built on the wrong mental model.
If they're wrong, the flexible mortgage market that absorbed self-employed borrowers and new Canadians over the last decade shrinks into a smaller number of larger players who can afford the compliance load. The borrowers don't disappear. They move further from visibility.
Regulated Alternative Lenders Are Not Private Lenders: Why CAMLA Says Canada's Non-Bank Rules Must Split the Category
When OSFI published its 2025 Financial System Review, it used the term "non-bank lending sector" 47 times. Mortgage Investment Corporations that report quarterly to provincial securities commissions got the same label as a dentist in Oakville syndicating second mortgages to three friends. The Canadian Alternative Mortgage Lenders Association is now telling regulators that distinction matters more than the shared label suggests.
The position paper released this year argues for a two-tier structure: regulated alternative lenders in one bucket, genuinely private arrangements in another. CAMLA represents MICs and trust companies already filing audited statements and meeting capital thresholds. A private lender might be a single high-net-worth individual placing a $400,000 loan with no reporting requirement beyond the mortgage itself. The organizations barely resemble each other except that neither takes deposits.
Why regulators grouped them in the first place
Non-bank lenders now hold 10 to 12 percent of the Canadian mortgage market. That share has grown as stress-test rules pushed more borrowers, self-employed, new immigrants, gig workers, away from the Big Six. From a systemic-risk perspective, OSFI sees anything outside the federally regulated deposit-taking framework as harder to monitor. The 2008 US crisis was built on non-bank originators securitizing loans they never held, so Canadian regulators spent the last decade watching for concentrated risk in entities they don't directly supervise.
The problem with that lens: Canadian MICs typically keep loans on their books and cap loan-to-value ratios between 65 and 75 percent. A private syndicate might go to 85 percent LTV on a second mortgage behind a first lien, layering risk the MIC wouldn't touch. One operates under audited financial controls and investor disclosure rules. The other operates under contract law and personal relationships.
What CAMLA is actually asking for
The paper doesn't argue against transparency. It argues that applying bank-style capital adequacy requirements to flexible B-lenders will push borrowers toward the unregulated side, the exact outcome regulators want to avoid. If a MIC needs to hold Basel-style capital buffers, its cost of funds rises and its rate premium (currently 200 to 500 basis points over prime) widens further. At some spread, borrowers stop choosing the transparent lender and go looking for the dentist with a line of credit and a risk appetite.
CAMLA's preferred split would let provincial securities regulators continue overseeing MICs while OSFI sets a lighter framework for lenders that don't take deposits and don't securitize broadly. Private lenders, those operating below a certain asset threshold and funding fewer than a set number of loans per year, would remain outside formal oversight but also outside the language of "shadow banking" that implies systemic importance.
The counterargument regulators won't drop
The Bank of Canada has pointed out that if several large MICs failed simultaneously, depositor confidence could crack even though MICs don't hold deposits. Investors who treat MIC shares like quasi-deposits might pull capital from other parts of the system. Rate sensitivity is higher in the alternative space because funding comes from private investors expecting double-digit returns, and liquidity dries up faster than in institutions backstopped by CDIC.
OSFI's likely position: drawing a clean regulatory line between a sophisticated private syndicate and a small MIC is legally messy. Exempting one category creates the gap that eventually gets exploited.
The actual trade CAMLA wants
The paper is a negotiation anchor. CAMLA knows some new oversight is coming. Publishing the two-tier proposal early lets them shape what "appropriate oversight" means before OSFI hands down a framework designed for deposit-taking institutions. The alternative lenders are betting that showing up with a specific, workable structure beats waiting for regulation built on the wrong mental model.
If they're wrong, the flexible mortgage market that absorbed self-employed borrowers and new Canadians over the last decade shrinks into a smaller number of larger players who can afford the compliance load. The borrowers don't disappear. They move further from visibility.
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