FSRA Credit Union Stakeholder Advisory Committee meeting with the Board of Directors

Summary of the meeting of May 14, 2024
25 Sheppard Avenue West and virtually via Teams

Stakeholder Advisory Committee members present:

David Gunderson - Ontario Educational Credit Union
Geri James - The Police Credit Union
Brigitte Goulard - Torys LLP
Marycatharine Kusch - Libro Credit Union
Sunny Sodhi - Meridian Credit Union
José Gallant - Alterna Savings Credit Union

FSRA Board members present:

Joanne De Laurentiis - Board Chair
Ali Salahuddin - Member
Brent Zorgdrager - Member
Dexter John - Member
Kathryn Bouey - Member
Lucie Tedesco - Member
Peggy McCallum - Member
Rob Wellstood - Member

FSRA management present:

Mark White - Chief Executive Officer
Mehrdad Rastan - Executive Vice President, Credit Unions & Insurance Prudential
Huston Loke - Executive Vice President, Market Conduct
Jordan Solway - Executive Vice President, Legal and Enforcement
Glen Padassery - Executive Vice President, Policy & Auto Insurance
Steve Powers - Executive Vice President, Corporate Services
Danielle Brown - Corporate Secretary & Deputy General Counsel, Legal and Enforcement
Paul Reid - Chief Financial Officer
Judy Pfeifer - Chief Public Affairs Officer
Antoinette Leung - Head, Financial Institutions and Mortgage Brokerage Conduct, Market Conduct
Dan Oprescu - Head, Prudential Supervision, Credit Union and Insurance Prudential
David Maxwell - Head, Regulation and Strategic Initiatives, Credit Union and Insurance Prudential
Victoria Lesau - Director, Credit Union, Insurance Prudential and Pensions, Policy
Daniel Padro - Head, Core Regulatory, Policy

General comments:

The Chair of the Board welcomed the Credit Union Stakeholder Advisory Committee (Committee) and introduced the Board. The Chair provided introductory remarks with respect to taking a forward-looking view about what FSRA can do from a strategic perspective for the sector. The Chair asked the Committee to comment on the factors or changes in their sector that they are actively monitoring, top sector risks and critical success factors for the sector.

FSRA management reminded the Committee about FSRA’s objects (i.e. objects that deal with financial services). The object driving the majority of FSRA’s work is to foster a strong, sustainable, competitive, and innovative financial services sector (which includes credit unions (CUs)). All the work FSRA is doing aligns with FSRA’s objects and the regulatory outcomes we are trying to achieve.

FSRA management noted the importance of the sector working collaboratively to find solutions to some of the key challenges that result from the current economic environment (i.e. increased costs, low margins, etc.). FSRA is currently developing a White Paper that will consider some of the key issues facing the sector and potential solutions.

The remaining meeting discussion centred around the following main themes: technology/data spend, regulatory pace of change, open banking, economic landscape, and sector growth.

Technology/data spend:

A Committee member noted that they are exploring how AI can integrate with the CU lines of business. They noted that there will be a significant amount of spending on technology which will increase overall costs. However, there is a balance that needs to be achieved by CUs in preparing the sector to adapt to upcoming innovations while also keeping costs under control, given the challenging fiscal times.

Another Committee member noted that although CUs are investing in technology, there are other costs that need to be factored in by CUs such as compliance (i.e. more legislative requirements, costs to participate in Payments Canada systems, new regulatory costs from the Financial Consumer Agency of Canada related to open banking oversight, etc.). IT costs are significant and are a constraint for smaller CUs.

FSRA management encouraged CUs to collaborate on common issues. For example, with the increasing need for investments in technology, CUs can pool together their resources for centralized technology solutions while still focusing on their own competitive advantage.

Regulatory pace of change:

One Committee member noted that the pace of regulatory change is daunting and there are opportunity costs for CUs to respond to these changes, particularly for smaller CUs that have limited staffing resources.

This member noted that FSRA should consider delaying the implementation of some of their regulatory initiatives and/or limit overlapping projects to assist the sector with resource capacity.

Open banking:

One Committee member noted that most of the smaller CUs (i.e. assets under $250 million) cannot foresee participating in open banking. Another Committee member supported this statement and noted that although there is a high level of interest, there are concerns about additional regulatory costs from implementing the required open banking standards and federal regulator oversight, as well as IT infrastructure.

Economic landscape:

One Committee member acknowledged that some branches in smaller communities have had to shut down due to lack of profitability and staff (i.e. labour market shortage). When these locations shut down, members will usually go to a branch location in a nearby town. In-person branch services are also less in demand now, as more members are banking online or by telephone.

Sector growth:

One Committee member noted that to foster more confidence in the sector, there needs to be broader public knowledge that CU deposits are insured. They noted that most CU members are not aware that they have deposit insurance coverage until CUs tell them. There would be more comfort from consumers if this messaging came from the regulator as this also aligns with FSRA’s object of fostering stability in the sector.

Another Committee member noted that the work being done by FSRA on capital requirements is very important for growth, particularly with respect to updates to risk-weights for assets. In addition, the sector needs more qualifying Tier 1 instruments as raising capital is key and investing it in innovative opportunities is vital to the sector’s growth.

Another Committee member noted that Boards are becoming more involved in the CUs overall strategy, however, it is a challenge to find directors with the necessary skill sets. CUs have to train Board members to be able to meet FSRA’s requirements. The Board of Directors Conference held by FSRA was an excellent tool to assist in educating Board members on FSRA’s expectations.

Another Committee member noted that one option for growth is to incorporate federally. The member noted that although Ontario has a strong regulatory framework, some CUs may make business decisions to go federal. FSRA management noted that it would look at federal continuance applications through the lens of its objects of promoting financial stability, protecting depositors, and with a view to understand the CU’s strategy and potential impact on its members as well as the Ontario credit union sector.

Concluding remarks:

The Board Chair thanked the Committee for their time and feedback.