New Government Proposals

Today the BC Ministry of Finance issued its consultation paper on changes to the Financial Institutions Act and the Credit Union Incorporation Act.  The first 43 of the 68 recommendations relate to general issues and credit unions; the remainder being related to insurance and trusts. As a package, the government has responded well to BC credit union submissions.

In short, the BC government wants a stronger regulator to complement a generous deposit insurance scheme.

Notably, credit unions get:

  • Unlimited deposit insurance remains, with some exceptions only.
  • The Basel III capital regime is being fine tuned to reflect co-operative capital instruments, and size/complexity.
  • A hybrid ‘made in BC’ approach capital requirements for to higher ratio mortgage is accepted.
  • And, regulatory authorities reorganized to ensure fairness and efficiency.

The major legislative policy changes are really in the restructuring of the Financial Institutions Commission, which is planned to be defined as a Crown agency, giving it greater independence from government.  The commission will have a bigger role in directing the affairs within FICOM, where the commission will appoint the CEO and statutory decision-makers (such as the Superintendent).

The paper emphasizes the need for enhanced financial literacy and places an obligation on provincially regulated financial institutions to provide education.  This has been an issue raised by the Minister.

But overall, the policies would grant greater discretionary powers to FICOM and provide only modest enhancements to member control.  Rule making and other powers are to be given to FICOM.  FICOM will also have to approve major business transactions.

Members will potentially have access to more information about their credit unions, as both credit unions FICOM will be obliged to publish some specified information and FICOM will be able to require added disclosure as circumstances may require.  There is a requirement for a complaints handling regime at each credit union.  There is a modest assurance that at members’ meeting each member is to have the right to raise issues, but the threshold for member initiatives (such as to call a members meeting) has been increased at large credit unions.

These are not dramatic new changes.  They do not really address the big trends of consolidation and the potential for credit unions transitioning to federal jurisdiction (and substantially weakening the co-operative system in BC).  The loosening of the liquidity requirements may similarly undermine the co-operative second tier entity, Central1.

What is missing?  There is no comment on, or change to, the barriers to the creation of new credit unions.  The existing legislation has effectively closed the door on any group of people, any community.  No new credit union has been authorized in 28 years.

Comments are sought to the end of June19, 2018.

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