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Finance Minister Jim Flaherty waits to speak to a business crowd in Toronto on April 21, 2010.

Reuters

Finance Minister Jim Flaherty has written a letter to Canadian banks outlining restrictions that the government intends to place on their online promotion of insurance products, according to sources.

The finance department is expected to announce these new rules publicly as soon as this week.

Mr. Flaherty notes in his letter that the changes were necessary because of the "evolving use of technology by banks."

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A spokesperson for the minister could not immediately be reached on Wednesday.

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The finance minister says in the letter that, following broad consultations, he will now recommend regulations that will prohibit banks from providing information on most insurance products on any bank web page.

"The application of this prohibition will include the display of web links to web pages that promote non-authorized insurance," the letter states.

Banks will be allowed to have a link to their insurance subsidiaries on their corporate web page.

These details of the changes come more than six months after bankers said they were stunned to learn, by way of faxed letters from Mr. Flaherty, that Ottawa planned to curb the way they market insurance online.

The new restrictions are intended to replicate on the Internet the rules that have banned banks from selling most types of insurance in their branches since 1992. Banks are allowed to sell certain types of insurance, such as travel insurance and credit related insurance, in their branches and they will be allowed to promote those online.

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The original rules that came into effect 18 years ago stemmed from concerns that the banks might have too much influence and might link the granting of credit, such as a mortgages, to insurance, such as home insurance.

Mr. Flaherty held discussions with various bank CEOs recently in which he talked about this issue and listened to concerns that they and others in the industries had about the changes.

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