RBSF-CU appendix E: Quality assurance and reconsideration process
Purpose of consultation:
RBSF-CU Appendix E: Quality Assurance and Reconsideration Process aims to:
Bring greater transparency to FSRA’s Risk-based Supervisory Framework for Credit Unions (RBSF-CU) by describing FSRA’s quality assurance process in determining a credit union’s overall risk rating (ORR) and intervention level (IL) as well as a process that a credit union may follow to request a reconsideration if it can illustrate that a material element was not included in the assessment process.
These processes will help ensure that FSRA’s assessments are accurate and consistent, promoting trust, confidence and stability in the credit union sector while protecting member deposits.
The Quality Assurance and Reconsideration Process will be a new appendix (Appendix E) to the RBSF-CU. The RBSF-CU sets out FSRA’s approach for supervision and assessment of Ontario Credit Unions and Caisses Populaires (“CUs”). FSRA’s supervisory approach focuses on the assessment of significant activities, the associated inherent risks, and respective quality of controls and oversight functions to arrive at residual risks. This is followed by the assessment of capital (including earnings), liquidity, and resilience to arrive at the ORR and IL.
FSRA’s determination of a CU’s ORR and IL may include up to five levels of quality assurance. The first three levels apply to all credit unions irrespective of their size, complexity and risk profile. The last two levels apply to larger or more complex CUs and other credit unions on a case-by-case basis.
The Reconsideration Process will provide transparency on FSRA’s process for reconsidering its assessment of a CU under certain circumstances.
Appendix E will be effective upon publication.
Outcome of consultation:
No changes have been made to Appendix E as a result of the consultation.
Feedback from the sector:
FSRA received one submission with feedback on Appendix E: Quality Assurance and Reconsideration Process during the consultation period, December 11 2023 to February 8, 2024. The submission and comments are also available on FSRA’s website.
FSRA thanks the commenters. FSRA carefully considered all comments before finalizing and issuing the Guidance.
Contributors:
The following stakeholders took the time to share their perspectives with FSRA:
Organization
Commenter
1
Canadian Credit Union Association – CCUA
Brent Furtney
Feedback summary and FSRA’s responses:
Stakeholders
Summarized comment
FSRA’s response
CCUA
Having five levels of quality assurance may lead to longer assessments periods by FSRA. FSRA should clarify what factors would lead to a credit union moving into the fourth level of quality assurance.
FSRA should establish a timeline for each level of quality assurance for greater transparency and consistency in the sector.
Through the Principles articulated in the RBSF-CU, FSRA is committed to timely supervisory work.
As FSRA considers the size, complexity, and risk profile of each CU during all levels of the quality assurance process, timelines will vary for each institution.
Various factors could lead to the assessment of a CU requiring the fourth and fifth levels of quality assurance, including, but not limited to the CU being large, complex, or has an elevated risk profile.
For every assessment we balance thoroughness of work and documentation and timeliness, but we will not compromise on accuracy and consistency. FSRA will issue an Interim Supervisory Letter to the assessed CU as soon as possible so the CU can begin to address any issued recommendations and requirements in a timely way which may positively impact its ORR and IL.
Stakeholders
Summarized comment
FSRA’s response
CCUA
Outside of this consultation, FSRA should consider the possibility of conducting reviews in between assessments so that Overall Risk Ratings can be adjusted quickly to reflect measures that have been addressed by credit unions after they have addressed material risks identified through the assessment process.
The RBSF-CU sets out that a CU’s assessment and rating will be changed to reflect the current state of the CU if new information indicates a material change in a CU’s risk profile.
Once issues that have been identified through the assessment process have been addressed, FSRA will review and determine what changes to the ORR and IL are warranted on a continuous basis and not on a regular assessment schedule. With the introduction of the RBSF, FSRA has moved to a continuous assessment process where changes to risk ratings may be made at any time by FSRA as new information becomes available including the CU demonstrating remediation of outstanding issues.
Stakeholders
Summarized comment
FSRA’s response
CCUA
For the reconsideration process to be effective, FSRA will need to be open to differing viewpoints of credit unions around the accurate interpretation of information or evidence.
FSRA’s thorough assessment and quality assurance processes are expected to minimize the need for the reconsideration process.
FSRA will give due consideration to all reasonable requests that come forward.
