FSRA Stakeholder Advisory Committee for Credit Unions

Summary of the meeting on November 6, 2023
Via Zoom

Stakeholder Advisory Committee members present:

Allison Kasper - Copper Fin
Brigitte Goulard - Torys LLP
David Gunderson - Ontario Educational Credit Union
Geri James - The Police Credit Union
Jeff Guthrie - Canadian Credit Union Association
José Gallant - Alterna Savings
Marycatharine Kusch - Libro Credit Union
Richard Adam - Northern Credit Union
William Boucher - Desjardins Ontario Credit Union

FSRA staff present:

Amber McNair - Senior Manager, Credit Union Policy
Antoinette Leung - Head, Financial Institutions and Mortgage Brokerage Conduct, Market Conduct
Brian Mullan - Director, Regulatory Initiatives and Knowledge Management
Bradley Hodgins - Director, Regulatory Initiatives and Knowledge Management
Dan Oprescu - Head, Prudential Supervision, Credit Union and Insurance Prudential
Daniel Padro - Director, Policy, Credit Unions and Pensions, Policy
David Maxwell - Head, Regulation and Strategic Initiatives
John Caldwell - Legal Counsel
Jordan Solway - Executive Vice President, Legal and Enforcement
Judy Pfeifer - Chief Public Affairs Officer
Paul Reid - Chief Financial Officer
Mingxin Li - Director, Data, Surveillance and Reporting
Mehrdad Rastan - Executive Vice President, Credit Unions & Insurance Prudential
Steve Kokaliaris - Director, Approvals and Insurance Prudential Practices
Stuart Wilkinson - Chief Consumer Officer

Ministry of Finance staff present:

Chris Perrin
Dana Gold

Overview/summary of key comments from the SAC meeting:

  • FSRA provided a brief overview of the 2024/25 credit union (CU) priorities, the outcomes and the activities which will support each priority. FSRA outlined how the 2024/25 priorities are continuing the work from this year’s priorities.
  • SAC members were generally supportive of the proposed CU priorities for 2024-25.
    • SAC members did indicate the need for additional clarification on certain terms used in Priority 5.1. and 5.3 (i.e., confidence and better governed), as well as the title for Priority 5.1 (i.e., to clarify that the priority is focused on supervision).

Specific feedback on the 2024-25 priorities

  • FSRA acknowledged and the SAC agreed that Priority 5.1 sounded like an outcome and that there was overlap between the priority and the outcome (i.e., specifically the language around promoting public confidence in the sector and the third outcome).
    • FSRA Response: FSRA will consider amending Priority 5.1 to make a clearer distinction between the priority and its desired outcomes.
  • The SAC indicated that the use of the term “greater” could be perceived as a suggestion that there is an existing confidence problem in the sector.
    • FSRA Response: FSRA will re-consider the use of the term “greater” in the third outcome for Priority 5.1 (i.e., improved protection of members and their deposits and greater public confidence in the credit union sector).
  • A SAC member asked whether FSRA is concerned with the level of public confidence in the sector and if this is the case how should confidence be measured.
    • FSRA Response: By including “promoting public confidence” in Priority 5.1, FSRA did not intend to imply that there is an issue with public confidence. FSRA promotes public confidence by understanding the nuances of the sector. For example, when stakeholders ask for an update on the sector, FSRA can share with them both a holistic overview and, a more granular, deeper understanding of each CU.
    • FSRA measures public confidence in part by collecting data on consumer complaints and through consumer surveys.
      • FSRA regularly conducts both stakeholder and consumer surveys. These provide valuable insights on consumer sentiments towards the sector and what stakeholders are hearing from their consumers. FSRA conducts these surveys for each of its regulated sectors.
      • FSRA has not received a significant number of consumer complaints relating to CUs, relative to other sectors.
  • A SAC member wanted clarity around what “better governed” referred to in the first outcome for Priority 5.1. (i.e., a better governed, competitive, and stronger credit union sector).
    • FSRA Response: In the past FSRA encountered a variety of governance practices when assessing CUs. FSRA issued the Sound Business and Financial Practices Rule, which sets out principles and outcomes-focussed requirements for effective CU governance. FSRA aims to further promote best practices in governance. For example, the supervisory process is not just about gathering information from CUs, but it is also an opportunity for FSRA to share learnings/findings with the sector. To encourage better governance in the sector FSRA has also taken steps to regularly engage with CU Boards of Directors (i.e., FSRA Conference for Board of Directors etc.).
    • FSRA acknowledged that, given the discussion on Priority 5.1 around the use of the term “confidence”, revisions to Priority 5.3 may be necessary.
  • One SAC member wanted clarity on whether the Liquidity Adequacy Framework review in Priority 5.2 is a new item or if it was included in the 5-year sector workplan.
    • FSRA Response: This was included in the 5-year CU workplan and is not a new item. All FSRA rules are reviewed within a 5-year period of their effective date. The review will provide an opportunity to clarify areas of ambiguity in the liquidity framework. In addition to the Liquidity Adequacy Requirements Rule, existing liquidity guidance documents will also be reviewed/updated.

Feedback on the 2024-25 financial plan

  • Given the current economic environment, one SAC member noted that FSRA should keep the 2024/25 budget flat.
    • FSRA Response: FSRA projects a 1.4% increase in Variable Fee Assessment to CU sector from FY2023-24. At the same time, FSRA’s costs in this sector are expected to increase by 6%. FSRA will be able to keep the Variable Fee Assessment increase below its costs increases by proactively using the accumulated surplus.
  • A SAC member requested clarity on how much of a surplus FSRA has as an organization.
    • FSRA Response: The surplus is $26M which has been built up over a few years. The surplus stems from, among other things, not having been able to hire as quickly as planned across the organization, due to the pandemic.
  • One SAC member inquired as to how the $300K allocated for public education will be used.
    • FSRA Response: This amount will be used for Public Affairs activities. Every time an e-blast is sent out or a guidance or rule is released, these documents must go through a communication process (i.e., key messaging, translation, AODA compliance, web design to posting). FSRA has 1 FTE to do all this work, with some additional partial resources to communicate in both official languages and to assist with running public consultations.

SAC submissions areas of discussion:

Enhanced Data Collection

  • The SAC was interested in an update on EDC timelines and on FSRA’s plans to modernize their internal database system.
    • FSRA Response: FSRA has undertaken a lot of work and preparation to receive data from CUs. How this data will be used, stored, extracted for risk assessments/thematic reviews is all sequential. Once EDC launches FSRA will accept all existing data (MIR, financial templates) and new instrument level data. EDC will be the tunnel through which the data will flow and be stored in the relevant databases.
    • FSRA has worked closely with CUs to prepare them for the EDC launch, which will be in early 2024. To help prepare for the launch, FSRA:
      • held a series of TAC meetings over the last few years. From these meetings developed a prototype with the feedback from 5 CUs.
      • conducted individual working group sessions on the standard (Regulatory Risk Data Standards).
      • held discovery sessions with individual CUs to provide an introduction on EDC and to address their questions.
      • is currently in the last phase of data mapping and preparation for the EDC launch (have worked with 33 out of 58 CUs).
      • will update the EDC website to reflect updated EDC timelines/expectations for 2024.
      • will also add EDC to the agenda for the next FSRA Townhall as requested by the SAC.
  • One SAC member commented that CUs need time to get banking suppliers to write code once EDC launches.
    • FSRA Response: FSRA is flexible on the timelines and will take into account the individual circumstances of the CUs we have been working with.
  • A SAC member wanted to know whether EDC included the FSRA Forward project and the relationship between the two projects.
    • FSRA Response: FSRA Forward is the overall technological upgrade journey for FSRA and includes various projects for different sectors. EDC is a sub-project of FSRA Forward specifically for the CU sector. FSRA has budgeted for EDC under the “technology solutions” line item and as part of its baseline costs.

2024 Capital Adequacy Framework review

  • The SAC wanted an update on the review of the Capital Adequacy Framework Review.
    • FSRA Response: FSRA is initiating the review this fiscal year and, in light of improved data collection activities (i.e., EDC) will be looking to identify opportunities to better align capital and risk. FSRA will also look to clarify existing ambiguities which have been identified by CUs upon implementation of the Rule.
  • One SAC member inquired as to whether FSRA had engaged Central 1 as part of the Capital Adequacy Framework Review.
    • FSRA Response: FSRA is open to feedback from all stakeholders including Central 1. To date, FSRA has not received any feedback specifically from Central 1, on the CAR review.

Climate risk update

  • A SAC member wanted to know if FSRA had any plans to address climate-related risk.
    • FSRA Response: FSRA has no short-term plans to issue Guidance addressing climate related risk. This has not been prioritized in our 5-year work plan but may be considered as part of the CAR review.

Mortgage markets

  • A SAC member provided updates on what they are observing in the residential mortgage market. They noted that the mortgage market is very challenging, and margins are very thin. They have seen a shift in consumers opting for a variable rate at renewal in anticipation that the Bank of Canada will lower interest rates soon.

Open banking/payments

  • The SAC wanted to discuss the potential impact of the various payment initiatives on credit unions operating in Ontario.
    • FSRA Response: FSRA highlighted current and future priorities to prepare the sector for open banking (e.g., EDC, Operational Risk Management and Resilience Guidance, IT Risk Management Guidance) and address any potential supervisory gaps. The work being done by FSRA is complimentary to federal efforts. FSRA is doing everything possible to ensure the sector can take advantage of open banking when federal parameters become clearer.

Federal Credit Unions

  • The SAC was interested in hearing about FSRA’s view on federally regulated credit unions interested in entering the Ontario market (i.e., limitations on them and impact on Ontario CUs).
    • FSRA Response: FSRA has no jurisdiction or oversight over federally regulated CUs. Currently there are three federally regulated CUs. To date no federally regulated CU has approached FSRA to discuss expansion into Ontario.
    • FSRA plans to hold a breakout session at the next FSRA Exchange on March 4, 2024, on the future of CUs (i.e., scalability, insourcing of services, shared services etc.)