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Email this7:54 pm
January 25, 2016
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Chapter 8 of the 2016 Federal Budget is lengthy and verbose, but I read it with interest to achieve somewhat of an understanding of what the future may hold for the Canadian financial sector. A number of measures noted in this chapter are of interest too, however I'm interesting reading of a layman's explanation/interpretation of the following regarding Credit Unions (and also willing to share their opinion about what would come out of this measure):
"The federal credit union legislative framework provides an option for credit
unions that seek to grow regionally or nationally. Recognizing that credit
unions considering the federal framework may face transition challenges, the
Government will propose legislative measures to provide targeted protection
against transitional risks and facilitate a smooth entry process."
8:40 pm
April 6, 2013
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I think that is a very polite way of saying that credit unions that wish to be federal financial institutions, with all the benefits, need to eventually comply with current federal rules, including those about deposit insurance limits and restrictions on in-branch insurance sales.
I think this, from the January 2014 Department of Finance backgrounder Temporary Transitional Support Under the Federal Credit Union Framework, is what Chapter 8 of Budget 2016 is referring to:
A number of credit unions have expressed interest in the federal framework. However, they also identified challenges in moving from provincial regulation to federal standards, stemming from differences in federal and provincial deposit insurance coverage, as well as insurance networking rules.
Deposit insurance coverage varies across Canada. While Canada Deposit Insurance Corporation limits insurance coverage to $100,000 per eligible account and/or product held at member institutions, many provinces offer greater or in some cases unlimited guarantees on deposits. Additionally, while federally regulated deposit taking institutions are prohibited from selling insurance in their branches, credit unions in some provinces can share premises with insurance affiliates.
To help address these challenges, the Government of Canada will provide temporary transitional support to eligible provincial credit unions that have provincial acceptance to move to federal regulation by offering extended deposit insurance and a short-term funding facility, as well as an extended transition period to comply with federal insurance networking rules. The support would enable credit unions that choose federal regulation to continue to operate seamlessly and to benefit from oversight by the Office of the Superintendent of Financial Institutions.
Over time, this flexibility will help eligible credit unions adjust to the same framework as other federally regulated deposit taking financial institutions
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