FSRA’s Town Hall for Ontario Credit Unions

0:00

Hello everyone and welcome to today's webinar, FSRA's Credit Union Town Hall.

0:07

Before we get started, I would like to go over a few items so you know how to participate in today's event.

0:13

You have the opportunity to submit text questions to today's presenters by typing your questions into the questions pane of the control panel.

0:21

You may send in your questions at any time during the presentation.

0:25

We will collect those and address them during the Q &A session at end of today's presentation.

0:32

I would now like to introduce David Maxwell, Head Integrated Insurance Supervision. David.

0:41

Thanks Wendy and thank you everyone for attending this morning's town hall for the Ontario Credit Unions and Caisse Populaire.

0:48

As you can see we've assembled a veritable dream team of presenters today to cover a number of topics and if we go to the next slide Wendy, As you can see, we will be talking about the results of the emerging themes survey that each of your credit unions completed for us earlier in the spring.

1:10

We'll talk a little bit about themes and trends that we saw as well as what the implications are for our supervisory work based on the data that you provided.

1:20

Following that, my friend and yours, Brad Hodgins, will be providing an update on the capital rule.

1:26

And finally, Dana Preske will join to talk about EDC data quality as well as the work that's being done to allow you to realize the benefits of all the work that's gone in to the EDC system for the last several years.

1:42

We will be taking questions between sections, although we are happy to take your questions at any time.

1:50

I will be managing the questions and directing them to our presenters.

1:55

I would note that this is a collective setting for the sector as a whole.

2:00

And so I would ask you to keep that in mind when you ask your questions.

2:03

We'd like to focus on FSRA's approach rather than the circumstances of your specific credit unions.

2:09

So if I do see any four-part questions about the specific implications of the operational risk treatment the new capital role for your specific credit unions, I may ask you to direct that to your relationship manager instead.

2:22

We're always happy to have those discussions, but this is not a great setting for that.

2:28

I would also like to note that this presentation deck will be provided to you following the webinar. I know we always get some questions on that.

2:37

I imagine we still will at some point, given that people are still trickling in, but you will see these materials following the webinar.

2:46

And a last public service announcement, I want to direct you to the fact that we will be issuing in eBLAST for EDC early next week.

2:57

This is part of our regular process.

2:59

But I did want to flag a particular item to your attention, which is that we will be turning on late filing notifications for EDC.

3:10

This has no implications for your ability to file or your ability to file late for that matter.

3:16

But I will serve as an additional reminder for you to either file your data or get in touch with us to let us know the reasons for the delay.

3:27

With that, I'm gonna kick off our presentation.

3:31

But first, I need to acknowledge the land we're on is the traditional territory of many nations, including the Mississaugas of the Credit, the Anishinaabeg, the Chippewa, and the Haudenosaunee, and the Wendat peoples, and is now home to many diverse First Nations, Inuit and Métis peoples.

3:48

We acknowledge that Toronto is covered by Treaty 13 with the Mississaugas of the Credit and the Williams Treaties signed with multiple Mississaugas and Chippewa bands.

4:00

And so, as I noted, we're going to start with the results of the Emerging Theme Survey.

4:05

And for that, I'm going to turn it over to Shandor Salehi, Head, Integrated Credit Union Supervision, and Catherine Tam was the Director of Risk Assessment and Monitoring in Credit Union Supervision. Take it away, guys.

4:17

Thank you, David. Good morning, everyone, and thank you for joining us today.

4:22

As part of FSRA's ongoing supervisory work, we recently conducted an emerging theme survey across the credit union sector to better understand how institutions are preparing for and responding to a number of developments that are reshaping financial services.

4:40

Specifically, we sought insights on technology modernization, consumer-driven banking, payments modernization, data residency and sovereignty, digital assets, anti-money laundering, and artificial intelligence.

4:55

The rationale for this survey is straightforward.

4:58

The pace of change across the financial sector continues to accelerate.

5:03

Advances in technology, evolving member expectations, changing regulatory requirements and new forms of risks are creating both opportunities and challenges for credit unions and cash populaires.

5:17

To remain effective and forward-looking as a regulator, it is important that we understand how the sector is navigating these developments and where emerging risks may be taking shape.

5:28

The topics selected and covered in this survey are no longer future considerations.

5:35

They are increasingly becoming part of the operating environment for credit unions today.

5:41

We are seeing greater reliance on technology and third-party providers, increasing expectations for digital services, growing use of data and analytics, and heightened focus on cybersecurity, operations of resilience, and financial crime risk management.

6:01

At the same time, emerging technologies such as artificial intelligence and developments in digital assets have the potential to fundamentally change how financial services are delivered and supervised.

6:16

From a regulatory perspective, our expectations remain grounded in three core principles.

6:21

Boards and senior management must understand the risks associated with emerging technologies and industry developments, provide effective oversight, and ensure appropriate governance and control frameworks are in place.

6:38

Credit unions should identify, assess, and manage emerging risks before they materialize, including technology, cyber security, third-party data, operational and risks of financial crime, while maintaining resilience in an increasingly complex environment.

6:59

We support innovation and recognize its importance to the long-term success of the sector.

7:05

However, innovation must be implemented in a manner that is prudent, transparent, and aligned with regulatory obligations, while protecting member interests, privacy, security, and trust.

7:22

Ultimately, FSRA's objective is to ensure that innovation is supported by sound governance, effective risk management, and operational resilience.

7:33

Credit unions that are able to successfully balance these considerations will be better positioned to serve their members adapt to a rapidly evolving financial landscape.

7:45

The results we will share today provide valuable insight into how credit unions are thinking about these issues, where the sector is making progress and where there may be opportunities for additional focus going forward.

8:01

We hope these updates will support continued dialogue and help institutions assess their own readiness for the changes ahead. With that context, let's turn to the survey results.

8:15

FSRA is still in the process of consolidating the results on the additional questions to the survey and we will be in touch with credit unions individually to discuss responses as required. Next slide please.

8:34

It is important to recognize that technology transformation is increasingly becoming a business imperative for credit unions and cash populaires.

8:43

Modernizing IT systems is critical to maintaining competitiveness, improving operational efficiency, strengthening cybersecurity, and meeting evolving member expectations.

8:56

At the same time, these transformations can introduce significant operational technology, third party, and execution risks.

9:05

As a result, institutions must ensure that modernization initiatives are supported by strong governance, disciplined project management, and effective risk oversight.

9:19

Our survey highlighted a sector that is actively navigating significant technology change.

9:25

Credit unions are modernizing their technology environments to replace legacy systems, integrate new platforms, and support future growth and efficiency objectives.

9:36

These efforts are also being driven by the need to strengthen cyber resilience in response to an increasingly sophisticated threat environment, including AI enabled attacks.

9:53

The pace and scope of modernization varies considerably across the sector, reflecting differences in the maturity, scalability and currency of existing systems.

10:03

While some institutions are further advanced in their transformation journey, others remain in earlier stages of planning and assessment.

10:14

The survey also reinforced the importance of the broader technology ecosystem.

10:20

The sector continues to rely heavily on a concentrated and interconnected network of third-party providers, although there have been changes in the marketplace with both new entrants and provider exits.

10:33

Many credit unions are leveraging external expertise and collaborative industry initiatives to support their digital transformation efforts.

10:44

Looking ahead, emerging developments such as real-time rail, consumer driven banking and digital assets have the potential to further accelerate the need for technology investment and change.

10:57

Successfully navigating this environment will require not only financial investment, but also access to specialized skills, expertise, and robust project risk management practices to ensure that transformation initiatives are delivered safely and effectively.

11:17

Next slide please.

11:23

Survey results indicate that 14 credit unions are not affected by Central One's exit from the digital banking business.

11:32

While 23 credit unions have already selected a new digital banking platform and are in the process of implementing a new solution, 11 institutions are in the early phase of identification of a solution to Central One's earlier decision to exit the digital business.

11:51

15 of those credit unions who are transitioning to a new digital platform, the implementation process is supported by a project risk management framework.

12:01

Thirteen credit unions manage the transformation project with the help of the combination of internal staff and third-party vendors.

12:11

FSRA will continue to monitor the transition of credit unions to ensure strong project risk management, effective governance, and appropriate oversight of third-party vendors.

12:23

This includes focusing on credit unions that have not yet selected a new platform, those without formal project risk frameworks, and those heavily reliant on external partners for delivery.

12:37

FSRA will also reinforce that accountability for safe and sound outcomes remains with each credit union, regardless of the third parties they engage.

12:48

Through this oversight, FSRA aims to support sector-wide readiness for safe, timely, and well-governed IT transformations.

12:58

With that, I am passing it on to Catherine to speak about the other themes in the survey.

13:03

Over to you, Catherine.

13:05

Thank you, Chandor.

13:06

The next theme that we have is on consumer-driven banking, otherwise known as open banking.

13:12

First off, I'll kick off with some background information for the latest update on this The purpose of consumer-driven banking is to allow consumers to direct data safely and securely to be shared with participating entities of their choice.

13:29

This will foster competition by providing more products and services to consumers.

13:35

Phase one of the consumer-driven banking initiative will only be read access.

13:40

We're faced to expanding to also providing right access after the Payments Canada real-time rail launch.

13:49

FSRA's goal for consumer-driven banking is to support sector growth and innovation, but at the same time, we would like to ensure that sufficient safeguards are in place as required by legislation.

14:02

And this is defined in the Consumer Driven Banking Act, which has come into force after the Bill C-15 received royal assent earlier in March.

14:13

FSRA and together with our ministry have been consulted on the legislation development process.

14:22

Provincial credit unions' participations are not mandatory.

14:27

However, for those who are interested in participating, they will be subject to a streamlined accreditation process administered by the Bank of Canada.

14:38

The Bank of Canada's mandate is also to supervise, but they would also have the authority to delegate responsibility to provincial regulators such as VISTA.

14:50

Next slide.

14:56

In terms of survey results, we learned that 11 credit unions in our sector are interested in participating.

15:02

They are mostly large credit unions with greater than $1 billion in assets, with a few between $200 and $600 million smaller credit unions also interested in participation.

15:13

There are also a few third-party providers whom our sector is working closely with, and we expect these will also be subject to accreditation.

15:25

Our sector is using a variety of IT risk management industry framework for risk management, with CIS and NIST being the most common.

15:35

We also acknowledge that some credit unions have invested in API and consent management capabilities, getting ready for CDB adoption.

15:47

As the next step, FSRA, together with our ministry, will work with the Fed Finance and the Bank of Canada on the regulation development, and also to work out the implementation plan for our sector.

15:59

Our goal is to ensure a level playing field for credit unions who are interested in entering the CDB ecosystem.

16:08

In the meantime, we encourage credit unions to check out the Consumer Driven Banking Act for any updates on the legislation requirement and stay tuned for more information.

16:24

With that, I'm going to move on to the next theme.

16:26

Next slide.

16:28

Payment modernization.

16:29

This is another multi-year federal initiative with we'll be hitting a major milestone this year with real-time rail going life later this year.

16:41

Real-time rail is expected to enable instant, data-rich, account-to-account payments available 24-7, equipped with enhanced fraud management capabilities.

16:55

In addition, recent legislation changes means that credit unions are now eligible to become Payments Canada member.

17:06

Our survey has indicated that three of our credit unions are already Payment Canada member with one other credit unions in the process of applying.

17:17

Membership at Payments Canada does not mean direct participation in Payments Canada systems because participation would require additional requirements.

17:29

No credit unions have immediate plans to change the arrangement with central one immediately, but a third of our sector has indicated that there might be changes in the medium to long-term.

17:44

We recognize that a few large credit unions have applied for Payments Canada membership, recognizing it as one of Bank of Canada's emergency liquidity eligibility criteria.

17:58

Other criteria would also include credible recovery and resolution frameworks, as well as indemnity from the province.

18:07

FSRA will continue to work with Bank of Canada in facilitating requests for ELA for our large credit unions.

18:15

We are also excited to hear some credit unions have said that the introduction of RTR real-time rail will present many great opportunities.

18:25

To name a few that was include enhanced operational efficiencies, improved cash management, fraud reduction, and the ability to offer state-of-the-art products and services to the members.

18:39

FSRA's goal is to support our sector in realizing all these benefits.

18:45

Lots of exciting opportunities coming up.

18:49

Moving on to the next theme, next slide.

18:53

This is on data residency and sovereignty, which is related to data governance.

18:59

Data residency refers to the physical location where data is stored and processed, while data sovereignty is actually a legal concept.

19:08

FSRA will continue to create awareness on the differentiation between the two.

19:13

Our survey result has indicated that more than half of our credit union report cloud usage, ranging from core systems to enterprise solutions.

19:25

Cloud service providers are third-party providing storage solutions for our sector.

19:30

It is important for credit unions to track where their data resides at every stage of the lifecycle and understand which laws apply.

19:40

In a cloud environment, data may cross multiple borders, collected in one country, stored in another, and processed in the third, triggering overlapping legal requirements.

19:52

The best practice would be then to include an understanding of data flows when third parties are being engaged, and then also recognizing that their international presence may cause complexity.

20:07

It expects practice to build contractual provisions to ensure that there's full disclosure on data flows.

20:16

Credit unions can refer to Fisher's operational risk and resilience guidance as well as IT risk management guidance if they want further information on safeguarding confidentiality, integrity, and availability of members' data.

20:35

Moving on to the next theme, digital assets.

20:38

Their assets are blockchain assets like cryptocurrency, tokenized securities and stable coins.

20:46

They continue to expand in scope and importance offering technological innovation across financial sector and offer new forms of money that presents opportunities for especially when RTR, real time rail and consumer driven banking right access becomes life later this year or the next year.

21:06

The increasing use of foreign currency, for example, US-based stablecoin, could also undermine Canada's sovereign national monitoring sovereignty.

21:20

Shortly after the US Genius Act has become life, our own version of the Stablecoin Act has received broad assent in March 2026, facilitating the issuance of Canadian-based stablecoin.

21:33

Our survey results have indicated that none of our credit unions have definitive plans to become stablecoin issuers, and a handful are exploring opportunities as qualified custodians for issuers' reserve assets.

21:51

We will continue to monitor the development on strategies by credit unions, with Thrister's goal being to support sector growth and innovation while ensuring safety and soundness of our sector.

22:04

While digital assets may present opportunities, they can also create new types of risks such as financial crime and fraud as the most vulnerable impacts.

22:17

Our survey reveals that credit unions are currently taking a measured approach on digital asset activities, and FSRA will continue to understand through our supervisory engagement with our credit unions on the strategy and benefits of digital assets advancements.

22:36

Now I'll pass it on back to Shandor to cover the next theme.

22:40

Thank you, Catherine.

22:43

Canada's anti-money laundering and anti-terrorist financing environment continues to evolve rapidly with FinTrack placing greater emphasis on the effectiveness of compliance programs and demonstrating a greater willingness to take enforcement actions.

22:58

Over the past two years, major Canadian financial institutions including TDRBC and CIBC have received administrative monetary penalties, reinforcing expectations for strong governance, effective monitoring, and timely reporting of suspicious activities.

23:17

At the same time, Canada's AML framework continues to expand.

23:21

Recent amendments to the PCMLTFA and its regulations broaden the regime to include additional sectors such as financing and leasing companies, factors and check cashing businesses.

23:34

The changes also introduce mandatory reporting of material beneficial ownership discrepancies, enable information sharing amongst reporting entities to help detect money laundering, terrorist financing and sanctions evasion and strengthen money services business registration requirements.

23:58

Within the credit union sector, 22 institutions have undergone or are currently undergoing Fintrack examinations over the past 24 months, signalling heightened regulatory scrutiny.

24:10

Common issues identified through effectiveness reviews include member account documentation, politically exposed personal requirements, ongoing KYC updates and AML policies and procedures.

24:24

Encouragingly, most credit unions have responded proactively by updating their AML ATF policies, procedures and training programs to reflect regulatory changes and evolving financial crime risks associated with digitalization.

24:39

Looking ahead, FSRA will continue to monitor the effectiveness of board and senior management oversight of AML-ATF programs, assess the implications of FinTRAC examinations and potential penalties, and evaluate the scope and effectiveness of their reviews.

24:58

The key message is clear.

25:00

Regulatory expectations are rising, enforcement activities increasing, and institutions must be able to demonstrate that their AML programs are effective, risk-based, and capable of responding to increasingly sophisticated financial crime threats.

25:17

I am now passing it back on to Catherine to speak about artificial intelligence.

25:24

Thank you, Shandor.

25:26

AI is an extremely hot topic these days.

25:30

Rapid speed and scope of AI adoption is really reshaping the delivery of products and services in many industries.

25:38

AI innovation has become a priority for Canada to seize opportunity as well to remain competitive at the world stage.

25:47

For financial institutions, AI has unlocked significant potential for enhancing productivity and growth.

25:55

However, AI is also reshaping the risk landscape, heightening new risk awareness requirements.

26:03

The most prominent and pressing risk being fraud and cyber threats.

26:10

Criminals are leveraging AI and moving at unprecedented speed, scale and sophistication.

26:17

So financial institutions must constantly protect, detect, respond and recover from these attacks to build resilience.

26:27

Our survey results has indicated that the most common use case for our sector is fraud detection.

26:34

Other use cases include chatbots, AML compliance, credit adjudication in order to improve operational efficiencies.

26:44

60% of our credit unions have board discussions, and 75% mentioned that they have developed AI-related policies and frameworks.

26:55

Fisher's goal is to support AI innovation with sufficient guardrails managing AI risk.

27:02

The best practice may include the adoption of principles such as explainability, data, governance, and ethics.

27:12

We encourage credit unions to use our operational risk and resilience guidance for topics such as data governance, model, and third-party risk management.

27:24

These dependencies are all but applicable in the adoption of responsible AI adoption.

27:30

In our sound business and financial practices rule, we also mentioned that FSRA would expect credit unions to adopt strong governance and risk controls and can make sure that building muscle memory and cyber hygiene, prudent third-party risk management, model risk management are all important components for responsible AI.

27:55

All in all, AI advancement should not outpace risk management adaptation and FSRA will continue to work with the sector in having dialogues on the implementation of AI in the sector.

28:11

With that, I'm going to pass it back to Shandor to conclude our segment for today.

28:18

Thank you, Katrin.

28:19

Before we conclude, I would like to thank all of the credit unions and cash popularies that took the time to complete this survey and share their perspectives with us.

28:29

Your participation provided valuable insights into how the sector is navigating a rapidly changing environment and will help inform both our supervisory approach and our ongoing engagement with the sector.

28:43

Today's discussion reinforces three key takeaways.

28:47

First, it is critical for credit unions to consider the rapidly evolving technology landscape as part of their broader business and strategic planning, whether it is technology modernization, consumer driven banking, payments modernization, artificial intelligence, or evolving AML requirements. These developments are increasingly shaping the future operating environment.

29:11

FSRA supports responsible growth and innovation and recognizes that technology presents significant opportunities for credit unions to enhance member service, improve efficiency, and remain competitive in an increasingly digital marketplace.

29:30

Second, the nature of risk is changing.

29:33

Many of the risks associated with emerging technologies are fast-moving, interconnected, less visible, and may not be readily captured through traditional financial metrics.

29:45

As a result, credit unions should consider adopting a broader risk lens, one that extends beyond traditional operational risk management to include areas such as technology dependencies, third-party concentration, data governance, cyber resilience, and the implications of emerging technologies.

30:06

The goal is to ensure institutions understand their exposures, build resilience, and are prepared to respond when risks materialize.

30:16

Finally, FSRA remains committed to working collaboratively with the sector and other stakeholders to address both risks and opportunities.

30:28

Our objective is to support technological advancement and innovation while promoting sound governance, effective risk management, and the safety and soundness of Ontario's Credit Union sector.

30:40

As a next step, FSRA will be following up with individual credit unions to continue the dialogue on some of the themes discussed today, better understand institution-specific perspectives and circumstances, and identify opportunities for further engagement.

30:58

Thank you again for your participation, your openness, and your continued commitment to serving your members.

31:04

We look forward to continuing the conversation and working together as the sector navigates these important developments.

31:12

And with that, I am passing it over to David for questions.

31:20

Thank you, Shandor and Catherine.

31:22

So as I noted, we will be taking questions in between the sessions.

31:26

We'll also probably have some time at the end to answer questions as a group.

31:32

I'm seeing a slow trickle of questions, including the expected questions about whether or not this deck will be shared?

31:39

The answer there again is yes, we will be providing this deck to participants afterwards.

31:44

One other question here, Catherine and Chandor, for you.

31:49

You mentioned the operational risk and resilience guidance as well as the sound business and financial practices rule.

31:56

Is FSRA considering any other guidance on the topics that have been discussed today?

32:03

We've seen certainly the AMF and OSWI come out with their intentions on AI guidance? Is FSRA contemplating anything similar?

32:15

Thank you for that question.

32:17

So at this point in time, FSRA is not considering issuing an AI specific guidance.

32:24

The path that we would like to choose here is, as I said, to continue the dialogue and the discussion with credit unions, especially those credit unions who have already progressed or are in the process of progressing with implementing AI solutions and use cases.

32:43

And throughout these discussions, it will become clearer in the course of the next period of time, whether a FSRA issued guidance would be an effective tool and an actual support and help for the sector.

33:01

So we would like to give it the time to determine at what point in time this would be required.

33:08

Great. Thank you for that. I'm not seeing any additional questions at this time.

33:17

Oh, is the webinar being recorded? Will the recording be shared with attendees? It is being recorded.

33:28

I will have an answer for you on whether that will be shared before the end of this webinar.

33:33

I know for certain that the DAC will be shared.

33:36

We'll get you further information on our intention to distribute the recording as well.

33:45

Shandor, Catherine, you're getting off relatively easy for now, and I think we'll come back to any additional questions on this subject at the end of the webinar.

33:55

I feel like, unfortunately for Brad, the sector may be saving the tough questions for him.

34:01

So with that in mind, Shandor, Catherine, thank you for now.

34:05

And I'm gonna turn it over to my colleague, Brad Hodgins, who will walk through an update on the capital rule revisions? Thank you, David.

34:15

Yes, I have the pleasure of giving everyone an update on where we are in the review of the capital rule, as well as looking at the quantitative impact study results. So we'll begin with an overview of the capital rule review.

34:29

Next slide, please.

34:33

So the work to develop the proposal to enhance the capital adequacy rule has been informed by the results of supervisory assessments, opportunities that were identified through the enhanced data collection process to optimize capital allocation, as well as refinements to capital standards that we're seeing in other jurisdictions.

34:54

The intended outcomes of this proposal are as follows.

35:00

Enhanced stability and resilience of the credit union sector by better aligning required capital with the risks of the assets at individual credit unions as well as other risks within those institutions.

35:14

Better alignment with FSRA's principles-based and outcomes-focused regulatory approach and a more efficient and risk-aligned capital allocation that supports sustainable growth while attaining greater alignment with frameworks from other jurisdictions.

35:34

FSRA has presented the various aspects of the proposal at technical advisory committee meetings back in December 2024, again at a meeting in April 2025, and finally at a December 2025 meeting.

35:51

FSRA is committed to collaborating with the sector to ensure a shared understanding as we expressed through the review process.

36:00

We have refined the proposal based on the feedback that we've received both from individual credit unions and the CCUA over the past year.

36:14

The use of data received as part of the tariffs analysis work as well as through the EDC have informed the calibration of proposed risk weighting methodology and have provided the ability to assess the impact both on individual credit unions and the sector as a whole.

36:33

The data supports FSRA in ensuring the proposal is evidence-based and effectively aligns capital with the risks at individual credit unions.

36:44

Next slide, please.

36:47

Now, let's have a look at the results of the quantitative impact study.

36:51

Next slide, please.

36:54

So, using the data that was available as of December 31, 2025, FSRA completed a sector-wide quantitative impact study to determine the effect on credit unions' total capital ratio under the proposed methodology for credit, market, and operational risks and compared that to the values under the current methodology outlined in the capital rule that was issued in 2022.

37:22

In February and March of this year, FSRA worked with each individual credit union to provide direction as to the areas that required focus to improve both the completeness and quality of the data being provided through enhanced data collection.

37:40

Using the data received as of March 31st, FSRA updated the analysis based on this improved data provided by all credit unions.

37:51

We would like to thank all credit unions for the work that they undertook in improving both the quality and quantity of data provided through EDC by the end of March.

38:00

This allowed for a robust assessment of the effects of the new risk weighting methodology on the level of risk weighted assets and by extension, risk weighted asset capital ratios at individual credit unions.

38:16

Next slide, please.

38:20

All right, so before we get into the actual details, I'd like to like everybody to take note that we are providing information today at the aggregate level for the entire credit union sector.

38:30

We will be scheduling individual meetings with all credit unions to discuss these metrics for your individual credit union, along with the discussion of the quality of the data currently being received by FSRA and work towards identifying key areas of focus in improving the quality of data going forward.

38:49

At the sector level, total risk-weighted assets will decrease by approximately $3 billion from the current level of $54.4 billion to $51.4 billion under the proposed methodology.

39:05

This represents a decrease of about 5.5% in total risk-weighted assets.

39:10

As shown here, the decrease is due to a large decrease in risk-weighted assets from the of credit risk under the new methodology and this is partially offset by an increase in the operational and interest rate components. Next slide please.

39:31

Now looking at the effects of the change in risk-weighted assets on capital ratio this five and a half percent decrease in risk-weighted assets translates to a five and a half percent increase in capital ratio.

39:45

The tier one capital ratio would increase from the current level of 12.43% to 13.25% under the proposed methodology, which would be an improvement of 82 basis points for the sector as a whole.

40:02

Next slide, please.

40:06

Turning to the topic of data quality, the work that the sector collectively undertook in February and March resulted in an improvement in usable data elements from 82% of the required elements to 93%, which was a sizable and material change in the results.

40:25

And once again, thank the sector for the hard work that they did.

40:28

Said differently, based on the March data, FSRA received 93% of the required data elements needed to complete the capital calculations without having to take into account conservative assumptions or notching up on the different frameworks where data elements were missing or not credible for individual elements or instruments.

40:53

So as you can see here, the elements, there was a sizable increase in both the quality of the retail data as well as the commercial data as shown on this slide.

41:06

We'll go to the next slide, please.

41:10

Now let's have a look at the next steps and moving the capital rule proposal to the point of launch of a public consultation on a capital rule.

41:18

As I've said earlier, we've taken into account all of the feedback from the sector, we've calibrated the model, we've completed a quantitative impact study, and now we're at the point where we need to take all of these elements of this proposal and turn it into an enhanced capital rule.

41:35

So over the next couple of months, we will work to incorporate the various aspects into a draft version of the updated capital rule.

41:43

we are targeting September to complete this work.

41:47

Next, we will solicit feedback from FSRA's senior management and board, as well as the ministry of finance.

41:54

And we are targeting an October date to complete this work.

41:58

Next, we will finalize the new CAR rule or the capital adequacy requirements rule for public consultation and all the documents required as part of this package, after we have received the appropriate internal approvals as well as the approvals from the ministry to proceed.

42:16

We are targeting the end of December to complete this work.

42:20

And finally, we are aiming to launch the public consultation of the CAR rule and the related guidance in early January 2027.

42:31

We are also planning to have another meeting with the technical advisory committee in early September to provide an update as to where we've made difference or where we've made some calibrations in various aspects of the proposal to provide everyone because first will be the tech and then it will be shared with the entire sector.

42:50

So everybody will know where we have landed on the various aspects and preparation for the consultation which will begin in January.

42:59

Next slide please.

43:01

Now I'll be happy to answer any questions that you have about the CAPRA rule process.

43:08

Thanks for that Brad.

43:12

I'm going to start I guess with an update on the previous question in terms of the webinar being recorded and whether it be shared.

43:19

A recording will be available in English and can be translated into French on request that will obviously delay timelines on it being shared.

43:32

But yeah just to let you know that if you would like a recording it will be made available and thank you for that question.

43:44

Moving on to capital related questions and the first one for you Brad is when will the individual meetings with CU's regarding the QIS be?

43:58

Well I'll be working with the supervision team so Shandor and I will be working with the RNs to up those meetings.

44:05

I don't know when the first one's going to be, but I would say within the next couple of weeks we want to start that process and work through that in a timely manner over the next couple of months. That's correct Brad. Great.

44:22

Another question here, you mentioned one of the intended outcomes of the CAR rule review is to provide greater alignment where possible with with other jurisdictions.

44:34

Can you elaborate a little bit on the sort of process of balancing the sort of desire for alignment with those jurisdictions and, you know, a made in Ontario solution that ultimately is intended to benefit the Ontario credit union sector specifically?

44:52

Absolutely. So we worked very closely.

44:54

I mean, first we're looking at Basel, we're looking at to see what's happening at the federal level.

44:59

And then more specifically, we've been working very closely with BCFSA as they have been going through their own capital modernization process as well and learning from their big borewinds deal where you can as best possible and learning from the work that they have undertaken.

45:17

And then as we said, it's a best of all world.

45:20

So then you have to sort of temper that with what the conditions are in Ontario and making sure that you are not where it's necessary and where it seems appropriate, providing some additional changes to the rule, especially the methodology around the credit, the operational and the market, which was, as I said briefly earlier, was to sort of reallocate previously credit was accounting for approximately 95% of the risk weight assets were coming from the credit component and operational and the interest rate were about five to 6%.

46:01

With this new calibration, it's about 89 to 90% is coming from credit and then the operational and interest rate are about 10%.

46:10

And so in this situation, we've made some changes to the operational risk, which is a made in Ontario solution.

46:19

The interest rate risk we've adopted, some of the scenarios as laid out in Basel, and as I said earlier, credit.

46:27

We sort of got it alone and introduced new categories that we felt were appropriate for what we were seeing in performance of the Ontario sector and added some different metrics there.

46:39

And the calibration was informed by the work that we were seeing in B.C.

46:43

and working with our friends out in B.C.

46:46

Great.

46:47

Thanks for that.

46:48

I'm certainly familiar with the amount of work that went into ensuring that this was appropriately calibrated.

46:55

Question here about how long FSRA is expecting to open the rule for public consultation.

47:02

We are required to have it at least 60 days, as this is not a new rule, it's an update to a rule, but we are planning to be closer to the 90 days.

47:14

So closer to 90 days than the 60 days, depending on the timing.

47:17

But we want to give the sector the opportunity to have an appropriate amount of time to do a full-some review and understand exactly what we're getting into, which is why we're having the meetings over the next couple of months, providing the sector with a heads up in September as to where we have landed on the various metrics so that the sector can understand and have a couple of months in preparation for the actual consultation to understand what we're trying to do here, which at the end of the day is to, in situations where there are less risky assets, allocating less capital to support those assets, specifically in the residential area, as opposed to having a blanket 35%, regardless of what the underlying quality of those mortgages are, just because they haven't become delinquent yet, did not seem appropriate.

48:10

So I think that's why you're seeing the large change in the credit number or the credit component is because of the fact that we are introducing more appropriate to our mind from our calibration exercise, more appropriate risk weightings for lower risk assets.

48:29

Great, thanks for that.

48:31

There's a question here that I believe is probably in reference to the presentation that was made to the TAC and then subsequently shared with the sector as part of the data quality exercise. It says, was there another draft presented after the initial document?

48:49

So from what I've heard, it sounds like certainly the plan is to go back to the TAC with the calibrations, but that there hasn't been anything published in the interim. Is that right?

49:01

No, the last public document was on December the 8th and that was the day of the presentation.

49:06

So nothing has been shared with any specific credit union or the sector as a whole or some subset since that date.

49:14

We have been, as I said, there's been a copious amount of feedback and we appreciate the feedback because we would rather get the feedback now, work it into this plan.

49:22

So when we go for consultation, we've incorporated to the best of our ability the majority of the feedback in order to hopefully streamline the consultation process so there are no surprises.

49:34

And so we, as I'll say it a third or fifth time now.

49:38

We appreciate the feedback.

49:40

It gave us the opportunity to understand what was happening in individual credit unions.

49:43

We have made many adjustments along the way to make sure that this Made in Ontario solution in some situations does reflect what we're seeing in the sector, and we were happy to make those Made in Ontario solutions to reflect what we're seeing in the sector from a risk standpoint.

50:04

But yes, in September that will be shared, we'll have a contact meeting, but whether it's ourselves or through the CCUA, I'm sure that it will get to everybody in due course.

50:15

And as I said, that is going to be an update meeting.

50:20

As I said, we have to get to a point where we have to stop making iterations, and we've reached that point now, and now we have to actually go through and build up the documentation required to actually make these changes, like sort of, yeah, it's been about a year of iterations, but I think we're in a much better place because of the feedback and the interactions with the sector.

50:45

Great. I'm going to do one more question here before we move on to the next topic.

50:51

You're very popular here, Brad, and we'll clean up remaining questions at the end.

50:57

Thank you for continuing to submit them.

51:00

This one's in relation to interest rate risk for the QIS.

51:07

Wondering if there are any sort of insights at the sector level that can be shared at this time based on your experience with interest rate risk through the QIS, or if that's sort of a more appropriate topic for the one-on-one conversations with the credit unions that are going to have them.

51:26

Yeah, I mean, we're happy to have those discussions one-on-one at the individual credit union level.

51:31

But I think what I'll say now is that by putting the specific scenarios into the proposal, we are ensuring that everybody is using the same playing field.

51:43

Everybody is taking into account the same scenarios.

51:47

Now, I can say that it's not the same scenario that is the most dire or the one that is used to calculate it.

51:54

are based on the different makeups of the different credit unions.

51:58

There are several of those scenarios that become the one that is then used to determine the appropriate level of risk-weighted assets to support the interest rate risk, and then by extension the level of capital that is required to backstop the interest rate risk.

52:21

Great. Thank you, Brad, for that.

52:25

I'll call you back to answer some more capital-related questions as they come in.

52:32

But it is now time to turn it over to Dan Aprescu at Regulation and Strategic Initiatives to talk about the significant work that continues on our end around benefits realization and data quality on the EDC side. Dan?

52:48

Thank you, David. Good morning, everyone.

52:55

I will start with thanking the credit unions for their patience, persistence, diligence, and sheer effort to complete the EDC project and have all credit unions onboarded before the end of last fiscal.

53:13

That forms the basis of our modernization in data collection and analysis, supporting both the modernized supervision process, but also a slew of benefits that we have envisaged for the credit union sector.

53:38

And I will start with a very quick view for those of you who have used the system, that will look familiar.

53:49

This is a view of the portal, the EDC portal, and the red circle points to one of the options on the menu, the reports gallery.

54:04

This is where reports will be published, and those reports are being constructed, defined and constructed by Fistra, by us, with input from credit unions.

54:20

Currently we have two reports already in production.

54:27

One of them is, both of them are of an operational nature having to do with filings, with the filing process.

54:35

But I wanted to show this, to show that progress has already started in the benefits realization stage of this endeavor.

54:50

So the nature of the reports will go way beyond operational, as in who filed when, how many times, and what's the status of a filing.

55:03

These are what I call operational reports, but the real benefits come at the business and the things.

55:14

We'll get to that in a minute.

55:16

On the next slide, though, I would like to point out to some, to clarify some interpretation meaning of the word quality, because of the substantially increased amount and complexity of data we collect, some things like data quality will have to be redefined.

55:51

I have two exhibits on the slide.

55:53

And you see the sector view on what we call quality, as in completeness and integrity for two different applications.

56:13

So a loan record would have 160 attributes.

56:17

But for capital calculations, we only need a subset of those.

56:22

For stress testing, for example, for assessing the impact of tariffs on specific credit unions and on the sector, the data elements necessary would be a bit different.

56:37

Some commonality, some differences between capital calculations and tariff stress testing.

56:45

That's why you see on the left that the completeness and integrity for capital calculations are different, that those figures are different from the other application.

57:01

And the purpose of this is to inform the discussions that are ongoing between our supervisory team and our data team, data and analysis team, with individual credit unions.

57:16

So there is no single indicator of data quality anymore.

57:21

Data quality will depend on the application that data is being used for.

57:28

And that I'm pleased to report, that data quality has been improving from the early days of the onboarding over the past six months.

57:41

will monitor the improvements in data quality as described on this slide.

57:47

And the supervisory team will continue their work with individual credit unions to help bring up this data quality, which improves the analytical value.

58:00

Also, as you may be aware, in the capital calculations, there are provisions for where data is missing, but those provisions are conservative in nature.

58:13

So improving data quality should improve the outcome of the capital calculations.

58:23

There is a question that I just received.

58:27

Can I leave it for the end?

58:30

This is not a long presentation, mine is not long.

58:34

So only a few minutes to wait.

58:38

Now, I said earlier that the real value is in the business applications of having the new data structure, the enhanced data.

58:51

Let's have a look at this over the next two slides.

58:55

So on the next slide, we are showing the progression from just regulatory reporting to business intelligence. As I said, the reports are published in the report gallery.

59:13

Benchmarked reports are available to all credit unions.

59:17

However, unlike the past reports that credit unions are familiar with, there is an ability to drill down to individual credit unions and further down because the data definition is much higher now and to reassure everyone access to drill down will be identity controlled.

59:40

We put a lot of effort into data security and privacy confidentiality because now with availability of business analysis on the EDC platform, there is a lot of sensitive information that should be accessible only to individual credit unions.

1:00:06

This slide shows some applications.

1:00:08

These are just examples, if you want exhibits, on the kind of business intelligence that can be obtained.

1:00:16

So, on this slide we have loan portfolio analysis, and this is an indication also of the type of input that we would like to receive from credit unions.

1:00:34

So we would like to go beyond our best guess and what I would call the supervisory view.

1:00:43

On the next slide, we have more exhibits, this time on the deposits side of the balance sheet of credit unions.

1:00:58

Again, if institutions find deposit analysis or loan analysis useful, then we hope to see a lot of feedback.

1:01:11

and this would be an iterative process.

1:01:15

In fact, I will describe the process a little bit on the next slide.

1:01:25

So, what are we envisaging?

1:01:28

There's a wide range of applications that could be built by using the enhanced data collection data.

1:01:40

So, as both the regulator and the sector learns how to to use better this data structure, we will go through iterations to expand the range of analysis and reports available.

1:01:57

Ultimately, they will be published through the same portal, not dissimilar to the existing system, but it will be a much wider range of reports as I showed in previous slides.

1:02:12

The contributions to this buildup comes first from our own staff, history supervisors and analysts, data and risk analysts.

1:02:23

But also we are striking a technical advisory committee dedicated to this.

1:02:31

Call for members went out just recently and we expect to start work as soon as we can form this committee, hopefully in July.

1:02:40

And then we expect contributions from individual credit unions.

1:02:44

we already started to collect ideas and suggestions through one the one-to-one discussions that form part of the supervisory process.

1:02:54

Relationship managers are very important in this process but they're not the only channel of us receiving those suggestions and ideas.

1:03:07

FSRA CDC team has been at the the process developing and implementing the EDC system is going to be an important channel for this kind of communication.

1:03:27

And with that, I will address first the two questions that are already here for me.

1:03:38

The first one is, will this EDC data have APIs available?

1:03:42

So we don't envisage APIs at this point.

1:03:48

There was a suggestion early in the EDC project that we should have two-way communication between credit union systems and the EDC system.

1:03:59

At the time, that suggestion has been rejected by the credit unions, but we can revisit the issue.

1:04:06

I would take this opportunity to sketch the evolution of the EDC system.

1:04:16

It will go through annual revisions to implement suggestions or lessons learned from operating the system over the year.

1:04:28

Also, the risk and regulatory data, the RRDS will be reviewed regularly to make sure that it's still fit for purpose and the latest developments in the business world get included.

1:04:48

Thanks, Dan.

1:04:49

I think that was the only question so far, actually, as it relates to your portion of So here's a question that just came in, in fact, and it has to do with the frequency of reporting.

1:05:09

Question is, given the success of the EDC program, nice to see that the sector considers it a success.

1:05:15

Will there be a cessation of the weekly data collection that's been going on since March 2023?

1:05:22

I know this is a conversation that we've had with a number of stakeholders in the sector and that at present, the weekly data collection still feeds a reporting requirement that we have to the ministry.

1:05:36

But maybe you could talk sort of more broadly in terms of the frequency of reporting and what the future may hold there.

1:05:46

Yeah, absolutely.

1:05:47

Thanks for that.

1:05:48

And thanks for the attendee for this question.

1:05:52

It's very important because as long as EDC is viewed as a regulatory reporting obligation, I can understand the view of when is this going to slow down.

1:06:09

Because if it's viewed as a burden, of course.

1:06:12

But what we hope to achieve with the business focused reports is actually a service to credit unions where we hear the opposite.

1:06:24

And in fact, I think we've been asked already how quickly can you produce the reports after the data is provided to you.

1:06:34

the reason being that if those reports create business value I would expect credit unions to want that value earlier rather than later and to that end we are automating those reports such that if the liquidity data is provided on Wednesday by the end of day the business reports in the credit unions.

1:07:05

And if those reports are useful, then I would hope that the business wants to see the liquidity position more regularly rather than less regularly. Yeah. Yeah, I know that's great.

1:07:25

And I think, again, this sort of distinction between regulatory reporting and risk reporting is important.

1:07:31

From a regulatory standpoint, we're careful to not collect anything that we aren't using.

1:07:39

And so for now, we continue to require data for our own purposes and for our stakeholders' purposes at the frequency that it's being requested.

1:07:50

So those of you that have a weekly reporting requirement, we'll continue to reassess the necessity of that.

1:07:57

But in the interim, it will feed more dynamic and more useful reporting coming out of benefits realizations.

1:08:05

That's a very good point, David, and thanks for making it.

1:08:10

The range of stakeholders is more complex now because with more information, more people, more stakeholders want to be up to date on the state of the credit union sector.

1:08:23

And the Ministry of Finance is one very important stakeholder.

1:08:29

We would have to consult not just with credit unions, but also with other stakeholders like the ministry on frequency and reporting, and even type of reporting that's needed.

1:08:47

Great.

1:08:49

Question here on sort of timelines and whether you have any sense of when we might expect to see some of the business intelligence reports that you displayed start to be available in the portal?

1:09:03

We want to have some available for September.

1:09:08

I showed the operational reports because we only have onboarded all credit unions, I think sometimes late February.

1:09:21

So we have been both tuning the system but also starting to build these reports.

1:09:31

So there will be work over the summer to create some of these business intelligence reports and publish them by September.

1:09:40

Not the whole suite of reports, but we'll keep them coming just as much as the ideas and suggestions from the sector will keep coming.

1:09:50

Just a reminder, we are going to rely on the TAC input as well, and the TAC will start working as soon as we can convene it, hopefully in July.

1:10:04

So for more details, apply to join the TAC.

1:10:09

Absolutely.

1:10:10

Great.

1:10:12

One more question here in terms of, and this is one that I think what I'll do is just paraphrase what I heard you say as part of your presentation.

1:10:22

which is access to data.

1:10:25

In your comments, you mentioned other CUs being able to pull other individual portfolio CU data. Is that accurate?

1:10:30

What I heard you say is that we're very careful to control access so that as CUs drill down on the sector-wide data, they will only have access to their own credit union's data. Is that correct?

1:10:42

Absolutely. Absolutely.

1:10:45

This is a criterion that we had in place since we split the project in two phases, and I remember last summer, so a year ago, making a very big deal of this access control.

1:11:02

Great.

1:11:04

So Dan, I'm gonna give you a little bit of a break here and ask the others to join us on screen as we have some other questions to answer.

1:11:15

Here they are, friendly faces all.

1:11:19

And Catherine, maybe I can start with you on a question of what is FSRA's position on adopting a cybersecurity or IT governance framework such as NIST?

1:11:33

So FSRA has been in close discussion with our ministry, also conversations with the federal government on the development of the regulations for consumer-driven banking, for example.

1:11:45

We expect there will be more details to service shortly.

1:11:49

So far, the approach that we are taking is that FSRA is not going to prescribe any framework such as NIST and CIS, as long as the controls are in place and governance are strong.

1:12:03

So this is the approach that we have been taking, but we will hear more closely as to what's coming out of the federal direction on specific consumer-driven banking requirements.

1:12:14

Thank you.

1:12:18

Question here again on sort of your portion, Catherine, although maybe I can start with an answer and you can correct me because you know things.

1:12:28

Do you think FISR would be open to co-creating precedent AI policies with the sector to support development in smaller credit unions? So co-creation is tricky ground for a regulator.

1:12:40

There's significant moral hazard associated with that.

1:12:43

But I think we're very much open to having conversations about what your AI strategy is and what appropriate controls might look like.

1:12:54

I think it's important to stress that this is a very idiosyncratic process.

1:13:00

And the idea of template policies the credit unions can fill in makes me very nervous just from the perspective that it might not be be suitable for the activities that you're planning to undertake.

1:13:14

So that being said, we are very encouraging of collaboration amongst sector participants when it comes to this.

1:13:25

Talking about what makes sense, talking about what doesn't, talking about work already underway with your peers, I think is a great way to get a sense of the landscape.

1:13:33

Just as long as you keep in mind that this is not a one size fits all endeavor and that it will be important that you are able to give your own stakeholders confidence that whatever you produce is appropriate given your strategy going forward.

1:13:50

Not sure if anyone has anything to add on that.

1:13:59

All right.

1:14:00

That's the right answer because my answer was perfect.

1:14:05

Question for Brad.

1:14:06

In fact, a couple of questions here, just around clarifying timelines for the capital revolve.

1:14:13

So if you could just sort of, again, maybe just sort of reiterate for the crowd sort of when they can expect to see something for consultation and to the extent that we have control of the process, what might things look like from there on out?

1:14:29

Sure. So just maybe I caused some confusion by throwing September date, but the September date was sort of a sort of a checkpoint to sort of let the sector know where we were, where we have landed on the various aspects of the proposal.

1:14:44

but it does not change the fact that we are, the target that we are looking towards right now for a consultation would be early January due to the number of checks and approvals that are required in the interim.

1:14:59

As I said earlier, looking at potentially 90 days.

1:15:02

So we assume that it was till March 31st.

1:15:05

So completing the consultation by March 31st, and we started on the first week of January, that would be 85 days.

1:15:12

so it's not quite 90, but it's more than the 60, which is the minimum that is required.

1:15:18

That would have the consultation completed during this fiscal year.

1:15:23

From there, this is where it gets a little bit difficult because we don't know the level of feedback or the materiality of any feedback, and that may affect what we can do next.

1:15:34

I don't want to play anything out of the ether, but there could be some, if there are material changes that will require additional outreach to the sector, that would delay the process.

1:15:46

But as I said, we're trying to get as much feedback and incorporate as much feedback now to minimize the need for potentially a second consultation.

1:15:55

Now, we will do what needs to be done to make sure that this capital rule is appropriate and is robust, so we'll take that.

1:16:03

But we work on the assumption that it does not require a second consultation.

1:16:06

That would still mean that we would have to go through the same levels of review and feedback to the sector as part of every consultation.

1:16:14

We must look at all feedback, provide a feedback document as to, you know, we've heard your feedback, here's what we're going to do, we're not going to do, and if we're not doing something, we provide the rationale.

1:16:25

That work would take a bit of time, depending on what volume of feedback is.

1:16:30

Then we'd have to make any adjustments to the rule.

1:16:33

Then it would have to go through the regular approvals, go up to the ministry, and all those wonderful things, would probably take us into the fall.

1:16:43

So realistically, probably looking at the earliest date, a come into force would be in 2028.

1:16:48

I do not wanna put a date out there and then have to live with it.

1:16:53

But I'm just saying that there's a number of checks and balances that must be, must go through to which is appropriate.

1:17:03

So I would say that, yeah, we're looking at a coming into force data probably somewhere in early 2028, realistically.

1:17:13

Thanks for that.

1:17:17

Another question for you here, Brad, and this is about the improvements to risk-weighted assets that you spoke to in your slides, and whether that accounts for improvements in EDC data quality, or is there further improvement that the sector might see?

1:17:38

Yeah, so right now there are 7% of data elements, whether that's an LTV value or TDSR or some other metric along the way that we currently do not have.

1:17:51

And so the way the methodology is working right now is if we do not have an LTV, say for let's look at residential mortgages, if we do not have an LTV or a residential mortgage, we have to assume that the LTV of that mortgage is above 70%.

1:18:05

it might be 62, it might be 53, but it might be 78. We don't know. We have to make the assumption.

1:18:11

So it's this notching up process that we've had to go through.

1:18:14

So we're making a conservative assumption.

1:18:17

So depending on where that loan actually sits, when we get the real number for LTV, the value may, there may be an improvement for that credit union.

1:18:28

There wouldn't be a, it wouldn't get worse, but yes, it could get better depending on what the real number is.

1:18:33

based on what we had to do from an assumption standpoint.

1:18:38

Great.

1:18:38

Yes, there is a benefit to giving us all of the data so that we know actually what is out there.

1:18:44

And so it probably can't get worse, but yes, it could get better.

1:18:48

Yeah.

1:18:49

And I would imagine that that'll be a significant focus of the sort of upcoming conversations with individual CUs, as it has been in our past interactions.

1:19:00

Exactly.

1:19:01

It would be similar to the interactions in February or March, we will help credit unions understand where the largest value add is.

1:19:10

We have some time here, as I said, that it's going to be a while before this rule is coming into force.

1:19:15

Therefore, credit unions have a little bit of time, but the sooner credit unions can get that information in, the sooner that we all know what the – oh, yeah, why not?

1:19:25

It looks like I was a witness protectionist for a while. Sorry, inside thoughts coming in.

1:19:31

To understand both from ourselves and for the credit unions themselves to know, you know, what is this going to be like?

1:19:37

What is the final benefit to us? Great. So I have a final question left in my queue.

1:19:50

And so I'm going to make an appeal now.

1:19:53

If there are any other questions that you would like to get in, please do so in the next couple of minutes to reduce the amount of sort of awkward small talk that this group has to make while we give you time following this question.

1:20:10

We all like each other very much, but it can get awkward up here.

1:20:16

So Dan, question for you.

1:20:19

And this is with respect to the old method of filing regulatory data, the monthly information return.

1:20:27

Any update on timing of when the MIR might be ending?

1:20:33

Yeah, I wish that I could provide a very firm date, but at this stage we don't have it because what we need to see is good regular filing in the new system, but also there's some technical issues with just pulling the plug on MIR filing.

1:20:57

And that's from a technical point of view, which I assume is the driver of this question.

1:21:04

In terms of the monthly information returns as aggregates of the granular data underneath, that deprecation of reports and decommissioning will have to follow the developments in the benefits realization workstream.

1:21:29

So again, another good reason to be very engaged with us to arrive close to cruising altitude earlier rather than later.

1:21:40

So you can say, well, there's no need for, for example, a mortgage lending report because we, you know, the old mortgage lending, because we have one right here and the same for other balance sheet-based analysis that are now mere.

1:22:05

My wish is as soon as possible.

1:22:09

So please join me.

1:22:13

Thank you for that.

1:22:15

I do wanna note that there were a number of questions that were quite technical in nature that I would ask you to bring up again when you're having your individual discussions with the relationship management team as well as our capital team.

1:22:34

We will have lots of smart people around the table at that moment in order to be able to answer your specific questions, but we are going to – I'm sorry, more questions are coming in. I'm easily distracted by shiny things.

1:22:52

We will be avoiding some of those questions for now, just given the nature of this forum.

1:22:58

I also, as we wait for any last questions, want to reiterate what I said at the beginning, which is that late filing notices for EDC will be turned on starting next week.

1:23:13

You will be getting an e-blast to that effect on probably Tuesday.

1:23:22

But I just wanted to, just so there are no surprises, stress again that this is a feature that was always intended to be put in.

1:23:31

It is a reminder rather than a cutoff.

1:23:34

But again, just a reinforcing mechanism to ensure that you continue to stay in touch with us in terms of the status of your filings.

1:23:43

And we are, of course, very understanding when it comes to accommodating the challenges that may come up.

1:23:51

There's also a preview of that e-blast that our data team will send out, I believe, by the end of this week.

1:24:03

Yes, that e-blast, I think, was probably scheduled for Tuesday of next week.

1:24:08

Yeah, and it comes technically after July 1st, but the notifications will be turned on for July 1st, so there will be another communication interim to the E-BLAST.

1:24:23

Yep.

1:24:27

We have a last question here, which I will read out and we can address as a group.

1:24:35

Given the uneven internal capability across credit unions to develop AI governance frameworks independently, how can FSRA ensure that principles-based guidance meaningfully enables consistent and prudent AI adoption across the sector, especially for smaller institutions, without creating moral hazard through reliance on regulatory artifacts as a proxy for internal risk governance?

1:25:01

Well, that's a lot of big words.

1:25:04

So I think I understand the point here, which is that we have a very diverse sector, both in terms of the nature of activities, but also of course size, which means that we need be able to scale expectations based on size and complexity.

1:25:29

I think, you know, one of the things that credit unions need to consider deeply as they look at their AI governance framework is their capabilities and to align their strategy with their ability to provide meaningful oversight and controls for those activities.

1:25:49

And so, I mean, I think the moral hazard was probably in reference to my earlier comments about sort of the regulator creating template policies for others to use.

1:25:58

That being said, we are always eager to have conversations about what your plans are and to talk about how it fits in to your existing control infrastructure and to have some back and forth. Principles-based doesn't mean that we don't have an opinion.

1:26:13

It means that we're not going to be, in most cases, prescriptive about how we together seek to achieve the outcomes for the sector.

1:26:23

And so smaller institutions will have an impetus to at least examine AI as a possibility for them to create efficiencies, to create better outcomes for their membership.

1:26:37

We wanna have those conversations.

1:26:39

Please reach out to your relationship manager in that regard.

1:26:44

But again, the reason that we have not at this point put together plans to issue AI guidance is a recognition of the fact that we do need to be proportional in this exercise and that we feel the foundations are there in terms of the sound business financial practices role, the off-risk and resilience guidance in terms of the outcomes that we're seeking.

1:27:10

And we'll chat with you about the implications of what you have planning, how that fits in to the existing guidance and how we can mutually achieve a comfort level around the areas that aren't explicitly covered yet.

1:27:25

And that will continue to be our approach until we see evidence that a formal guidance from us would be beneficial.

1:27:33

And David, if you allow me to add something to this, in the meantime, the expectation would be very similar to other third-party provided or third-party used tools and applications and solutions that credit unions may already be relying on, that there is an appropriate governance and control framework around those, there is an appropriate third-party risk management framework around those.

1:28:02

So AI is one of such, but obviously with a very similar or potentially very different capabilities and outcomes, but at least it's a tool that credit unions will decide to use and that there has to be this parallel building up of the control and oversight frameworks as guardrails.

1:28:25

So these discussions will focus on the fact that, okay, what is the proposed use case?

1:28:34

What are the risks involved in that proposed use case and how is the credit union making that these risks are appropriately mitigated, recognized, identified and then mitigated across an organizational level governance framework and control points built into the process.

1:28:56

So these discussions will be around these points and that's again almost like a step-by-step process because the implementation of these solutions cannot outpace significantly the establishment of those guardrails and control and oversight frameworks because of the risk of any additional risk AI brings into the organization will effectively not be covered.

1:29:30

So that's one of the conversation lines that we are having with institutions and we are as part of our ongoing supervisory discussions with some credit unions, quarterly monitoring meeting and with some credit unions with a different cadence, but that is going to be in the focus of our discussions.

1:29:53

And the expectation is, as with all other tools, the credit union to understand the risks and see the alignment of those risks to the institution's risk appetite statement.

1:30:05

Would that risk appetite statement will have to be amended because of that AI application will open the institution up for maybe significantly different risk, different quality, or different types of risks that the current risk appetite statement has not recognized, and then the appropriate alignments will have to be considered.

1:30:28

Yeah, that's excellent context, Shander. Thank you.

1:30:34

Well, during the course of that response, I see that we have received no additional questions.

1:30:45

I will start to close this down as I keep my eye on the question pane by saying thank you very much to all of the attendees for joining us this morning.

1:31:00

These are subjects that are very important to us.

1:31:02

We know they're important to you.

1:31:04

and we really value this opportunity to talk to you about our approach and how it is evolving along with the rapidly changing environment.

1:31:16

Thank you for your very thoughtful questions and seeing no other questions I will give you all 27 minutes back and wish you all a very nice day.

1:31:30

Thank you very much.