New Department of Finance regulations could move B.C. credit unions that are keen to expand beyond the province another step closer to their goal.
The initial draft came out in July and the department is undergoing a review after providing a comment period for industry over the summer. The rules come two years after Ottawa made changes to the Bank Act to allow for federally regulated credit unions. Until then, co-operative financial institutions were exclusively under provincial jurisdiction.
Shawn Neumann, board chairman at Langley’s First West Credit Union, welcomed the latest step by the government to allow credit unions to expand beyond their provincial borders.
“This gives credit unions an opportunity to be a real alternative to the banks with locations across the country.”
Added Don Coulter, CFO and Surrey-based Coast Capital Savings, “We’ve been a long-time advocate for the federal legislation, and we think it would be a historic milestone that would benefit all Canadians.”
For credit unions to become federally regulated, the rules include several requirements. They include providing:
•a three-year business plan outlining changes to services it provides to members and the geographic areas the new credit union plans to do business in;
•a description of the alternatives the board considered to becoming a federally regulated institution; and
•a description of the pros and cons of converting to a federal credit union.
Neumann noted there would be some significant changes to a B.C. credit union’s business if it became a co-operative bank.
•By becoming federally regulated, it would fall under the authority of the Office of the Superintendent of Financial Services (OSFI) instead of the BC Financial Institutions Commission.
•It would also face changes to its insurance business, because it would have the same strict limitations on selling insurance that chartered banks face.
•It would also have to address the loss of unlimited deposit insurance, which B.C. members have had since 2008, a change that was part of former premier Gordon Campbell’s 10-point plan to boost confidence in the B.C. economy following the global financial crisis. The change also aligned B.C.’s credit union regulations with those in Alberta at a time when both provinces were considering allowing interprovincial mergers – an idea that has since stalled. As a federal credit union, members would receive up to $100,000 deposit insurance from the Canada Deposit Insurance Corp.
While these issues will have to be addressed, Coulter noted the opportunity and benefits of expanding nationally could be good for credit unions’ business customers. Small businesses with sales and operations in other parts of the country could see better service, and customers who move between provinces wouldn’t have to change institutions.
“We think that becoming federal would provide benefits to members,” said Coulter.
“When you’re making a business decision, there will be some benefits and challenges, but there’s nothing we see that is problematic.”
While the business case for becoming a federal credit union might be more challenging for B.C. credit unions, institutions in other provinces might have fewer things to consider.
Art Chamberlain, a spokesman at Central 1 Credit Union, noted that credit unions in Ontario and some other provinces don’t have unlimited deposit insurance and many have had the same rules as the banks on selling insurance.
He noted that Meridian Credit Union, Ontario’s largest credit union and the fourth largest in Canada, has already said it’s seriously looking at converting into a federal institution. •
