Canadian credit unions are cheering a decision by the federal regulator there to review a proposal that
The Office of the Superintendent of Financial Institutions recently published a notice saying it is “suspending the compliance expectation set out” in an advisory published on June 30 and will revisit the matter, pending a review by the Department of Finance. At such time, OSFI added, it will communicate its revised expectations for compliance with the advisory, as “appropriate and necessary.”
For now though, CUs across the country are calling it a victory.
“We are pleased that the federal government has recognized the need for a common-sense review of this issue,” Canadian Credit Union Association President and CEO Martha Durdin said in a statement. “Credit unions provide banking services to millions of Canadians and need to speak to them in a way they can understand.”
However, Durdin further cautioned that “although this is a positive development, it is critical now that the government hear from individual credit unions through the course of the consultation.”
CCUA is the national trade association for Canada’s 278 credit unions outside the province of Quebec.
In an interview with Credit Union Journal, Durdin called the development a “victory” for CCUA’s advocacy efforts, as well as labeling it “a victory for common sense” that “validates our push for the government to allow us to use the language that our members and the general public understand.”
Lawmakers in Canada are generally sympathetic to the nation’s credit unions, she added. “We faced no real resistance from politicians we spoke to after we explained to them our concerns,” she stated.
Durdin also said CCUA will continue to be involved in consultations with both the federal government and provincial authorities – not just on this issue, but on other matters, like ”fair taxation” for credit unions. (Unlike U.S. credit unions, their counterparts in Canada are subject to taxes).
“As insured, regulated, deposit-taking institutions, credit unions should be treated fairly and equally,” she noted.
Other Canadian credit union figures also weighed in on the matter.
Doug Macdonald, the national credit union consulting leader at MNP, a Canadian accounting, tax and business consulting firm, said the “strength of credit unions is their local presence, which the national advocacy strategy used to great effect.”
Canadian banks and credit unions, Macdonald added, are “well-regulated” and “financially sound.”
“They have a common interest in differentiating themselves from new entrants who aren’t held to the same standards,” he stated.
Growth hangs in the balance
Others, however, weren’t yet ready to call the movement’s campaign for “banking” a success.
Sandi Verrecchia, CEO of Satori Consulting Inc. of Burlington, Ontario, commented that although the government’s review is not a victory yet, it is “strongly encouraging” that the Department of Finance listened to CU stakeholders and advocates. More importantly, she added, they are continuing to assess the risks associated with the proposal.
“The intent of this policy change, along with many other proposed changes, is to support a strong and growing economy by positioning Canada’s financial sector for the future,” Verrecchia elaborated. “There is no doubt that the proposed change would hinder the future growth of Canadian credit unions by causing market confusion and putting them at a competitive disadvantage. This squarely defeats the intent of the proposed change.”
MNP’s Macdonald further indicated that Canadian credit unions have experienced asset and deposit growth similar to the banks, but they still “lag significantly” on non-interest revenue.
“For future growth it is critical for members and potential members to understand that credit unions are full-service financial institutions,” he observed.
But Coro Strandberg, president of Strandberg Consulting – a Canadian business consulting firm and a frequent credit union advisor – said she does not think that lifting the ban on “bank” and related words would necessarily lead to membership growth at Canadian credit unions, as “it would just permit current practices.”
Strandberg also observed that in the wake of the scandal over sales and false accounts at Wells Fargo, a federal government watchdog has initiated a review of the sales practices of Canadian banks.
“This issue is more likely to generate membership growth for credit unions whose success is not tied to sales but membership satisfaction and community relationships,” Strandberg added.
The bottom line, Verrecchia added, is that these words are “colloquial terms” used to describe “generic activities” synonymous with financial services, not federal banks.
“However, the Canadian credit union system is strong and advocacy is high,” she observed. “Regardless of the terms used to describe their day-to-day activities, they will continue to offer a strong alternative to banks, and will continue to be a strong contributor to the Canadian banking economy.”
