To protect depositors and enhance public confidence in the sector, FSRA has the power to help ensure that credit unions manage their operations in a prudent manner. The primary focus of our Prudential Regulation activities is to understand how current, and future events might impact risk in the credit union sector. As part of this oversight, credit unions are required to maintain strong capital reserves to mitigate against any potential losses.
While FSRA respects a credit union’s right to govern its own affairs, we also have the authority to take immediate actions if a credit union puts depositor funds at risk. As the sector regulator, we maintain the right to:
- Conduct regular on-site examinations
- Monitor a credit union through monthly reporting
- Issue non-compliance orders according to CUCPA and other regulations
All activities related to prudential oversight are executed through four departments:
FSRA's Relationship Management team meets regularly with the boards of credit unions to review:
- Protocol for examinations
- Risk management (including the dynamic impacts of asset growth on liquidity and funding, capital, credit risk and asset liability management)
- Operational and financial performance
- Business strategies and business plans
- Board and committee packages
In certain cases, FSRA relationship managers may request to sit in on credit union board meetings, or to receive Board and Committee packages, as a way of better understanding operations.
The examination process measures compliance with the CUCPA and Regulations, FSRA’s By-Law No. 5, Standards of Sound Business and Financial Practices and other guidance publications.
Examinations can take between 15 to 30 months, as determined by the risk profile and size of your credit union. They may be held at one of your locations or offsite. Once completed, FSRA's Relationship Management team tracks final examination reports on an individual basis, with each credit union.
Are you preparing for an examination?
Please read the following documents:
Examination Program - Insured Institution Faxback Form (2012)
Examination Review Process (April 2010)
FSRA’s Monitoring and Analysis team collects and analyzes financial and non-financial data from credit unions, to assess risk and promote compliance in the sector.
Risks assessed include:
NOTE: The process of risk assessment considers quantitative (financial information), qualitative (operational/ strategic) risks, and governance strategy. The process is collaborative between FSRA and a credit union.
Risk assessment framework
The risk assessment framework monitors capital and earnings trends, to support and manage the deposit insurance premium process. A risk assessment may be adjusted at any stage of the due to findings, observations, changes in business activities, and/or economic conditions.
FSRA’s Monitoring and Analysis department supports both the examination program and Relationship Management teams by analyzing all financial and non-financial information. This includes:
- Monthly and ongoing review of early warning indicators
- Annual review ICAAP: Capital Stress Testing
- Financial Analysis and additional data collection to support environment and market changes
- Liquidity Stress Testing
Different Premium Score Determination System (DPSD)
The Different Premium Score Determination System offers credit unions a way to lower their premiums, by reducing their risk profile. This system is based on two risk measures: capital and corporate governance. Assessment procedures and premium rates are assessed annually, to ensure the DPSD system is achieving its primary goal of reducing risk-taking behaviour in the sector. More detail can be found in the links below:
FSRA also has the authority to ensure that credit unions manage their operations in a prudent manner. The CUCPA requires that credit unions apply to FSRA for approval of all business activities, including:
- Purchasing or selling assets
- Borrowing from another credit union
- Investing in another credit union
- Acquiring or establishing a subsidiary
- Creating a group capital agreement
- File a by-law amendment
- Apply for approval to use a trade name or change a legal name
- Apply for a receipt for an offering statement
- Amalgamate two or more credit unions
- Dissolve a credit union
- Incorporate and Register a credit union
- Filing the Articles of Amendment for a credit union
For further information on regulatory applications and other transactional matters, please contact us via email at CreditUnionTransactions@fsrao.ca.
Exemptions and Variations
In some cases, temporary exemptions to CUCPA prescribed limits may be granted by applying to FSRA. Exemptions may be granted for:
- Capital and liquidity requirements
- Guarantees and Exemptions to aggregate limits for guarantees
- Lending and investment limits
Read our in-depth rules [PDF] for variations and exemptions.
If a Credit Union is found to be non-compliant with regulations, FSRA has the authority to impose penalties and orders, including administrative oversight or liquidation. FSRA may also:
- Impose conditions of deposit insurance
- Impose an administrative penalty
- Apply to a court to set aside a restricted party transaction
- Force a meeting of the Board of directors