The Government of Ontario has announced that it plans to update
the Credit Unions and Caisses Populaires Act
(Act) to implement recommendations made in a
recent report prepared by Laura Albanese, Parliamentary Assistant
to the Minister of Finance. Credit unions and caisse populaires are
financial institutions formed under the jurisdiction of the
province that provide essentially the same services as federal
banks but have cooperative ownership.
The report includes fifteen recommendations for the Government
to update the Act and other relevant Ontario legislation. The
following is a summary of some of the key recommendations of the
Regulatory capital requirements will
be revised to conform to the Basel III standard. In moving to the
standard, investment shares will be recognized as Tier 1 capital
provided that they meet certain requirements. A five year phase-out
will be implemented for existing investment shares. The minimum
leverage ratio will be maintained at 4%, however, off-balance sheet
assets will now be included in the calculation.
Gaps between the consumer protection
measures currently applicable to federally regulated banks and
those applicable to credit unions and caisses populaires will
either be closed by legislation or through voluntary commitments
provided by credit unions and caisses populaires. In addition, the
regulator will begin to collect consumer complaint data.
Credit unions and caisses populaires
will be permitted to enter into loan syndication agreements with
credit unions and caisses populaires in other provinces. In
addition to providing a vehicle for asset diversification, this
will allow credit unions and caisses populaires to retain larger
loans within the movement.
Credit unions and caisses populaires
will be permitted to wholly own a wider spectrum of subsidiary
businesses than currently permitted. As an example, the report
mentions the authority to own insurance brokerages, which will put
them on a level playing field with federal banks. However, the
report also recommends that credit unions and caisses populaires
retain the power to own vehicle leasing subsidiaries, a power that
the federal banks do not share.
Deposit insurance coverage for
deposits will be increased from $100,000 to $250,000. However,
coverage for registered accounts (such as registered retirement
savings plans and tax-free savings accounts), which is currently
unlimited, will be reduced to $250,000 for each type of registered
account. For example, a person who had $250,000 in each of an RRSP
and another type of registered account would have $250,000 of
coverage for each account. Currently, federal deposit insurance for
bank deposits is capped at $100,000.
Although the report did not recommend
additional corporate governance rules, the importance of strong
governance was acknowledged and the regulator was encouraged to
continue to monitor corporate governance practices at credit unions
and caisse populaires.
Also rejected was a suggestion from
some commenters that stricter rules be imposed for smaller credit
unions and caisse populaires.
Legislation to implement the recommended changes has not yet
been published and it is not yet clear the extent to which
individual credit unions and caisse populaires will have to update
their practices, policies and procedures. No timeline for the
changes was provided.
We will continue to monitor these developments and report on
this blog when draft legislation is released.
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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