![]() Terry Campbell, the chief executive of the Canadian Bankers Association, says banks are in favour of regulatory parity with the credit unions, in part because unlimited deposit insurance “is exposing the system to risk.”Ĭoverage varies across the country, and isn’t unlimited in all cases, but it is generally “as good as if not better” than the country’s banks, according to Marc-André Pigeon, director of financial sector policy at the trade association Credit Union Central of Canada. While the report said it is not clear government support would be “explicitly provided in all cases,” it suggested that the funding of some of the provincial plans “needs to be improved.” People, I’m sure, are depositing their money in credit unions because they realize they would have unlimited or at least a much larger guaranteeīringing credit unions into the tent with federally regulated banks would ultimately remove this unlimited deposit insurance from the system. The IMF also flagged the provincial government “backstopping” of these credit union guarantees. This unlimited guarantee if things go bad stands in sharp contrast to the $100,000 cap guaranteeing deposits in federally regulated banks through the Canada Deposit Insurance Corp. The report drew attention to the rare unlimited coverage for deposits in credit unions west of Ontario. The arbiter of global monetary policy and stability was critical of their “very uneven characteristics,” some of which it declared “very problematic.” ![]() In the past six months, both the International Monetary Fund and the Bank of Canada have flagged the importance of strong credit unions to the stability of the country’s financial system – and the weaknesses inherent in the patchwork system now in place.Ī report on Canada’s financial sector last spring by the IMF zeroed in on provincial deposit insurance schemes underpinning this country’s credit unions. But it was put in motion after the financial crisis, and there was also a strong desire to bring the credit unions under stricter federal regulation to ensure the stability of the system. Ottawa established the new legal framework for co-operatives to expand their branches and services across the country in 2012 as part of long-held desire to stimulate competition with the country’s tight group of banks. ![]() “They’re going to be subject to more stringent scrutiny – they would not be able to do what they did before - and I’m not sure some of these credit unions want that.” This advertisement has not loaded yet, but your article continues below. “Coming under a more rigorous and robust regulatory environment would mean they have fewer degrees of freedom,” says Ian Lee, an assistant professor of strategy and public policy at Carleton University’s Sprott School of Business. The combined assets of credit unions outside Quebec have grown to around $162-billion, not far behind National Bank of Canada with around $190-billion. Yet the credit unions are regulated through a patchwork of rules that harken back to their time as small community co-operatives with one or two branches.ĭisclosure is sparse compared to the big banks, and deposit insurance varies in an uneven and confusing manner from province to province.Īs banks around the world come under some of the strictest regulations the financial world has ever seen, credit unions seem to be happily staying under the radar and out of the reach of Canada’s federal bank regulator. To those who flag the co-operative financial services firms as an underappreciated risk to the stability of the country’s financial system, that is worrisome.Ĭonsolidation over the past decade has resulted in fewer but much larger credit unions that take deposits, lend money and issue mortgages just like a bank.
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