Meeting summary

TAC for Supervisory and Regulatory Initiatives

Date: December 6th
Time: 2:00-5:00pm
Location: Virtual

The meeting of the Supervisory and Regulatory Initiatives TAC focused on the credit union business arrangements survey, the draft Business and Investment Activities approach guidance and the draft Resolution Planning interpretation and approach guidance.

Credit Union Business Arrangements Survey

Overview

FSRA presented the results from its credit union business arrangements survey. FSRA issued a questionnaire to 61 credit unions in the Spring of 2021 and the response rate was 100%.

The survey requested participants respond to questions covering the following areas:

  • Business Arrangements
  • Policies, Procedures and Practices
  • Compensation
  • Promoting/Advertising
  • Disclosure
  • Training

The survey responses highlighted the importance of implementing controls to manage conduct relating to sales-based incentives. FSRA also recognized the importance that future surveys include questions related to business arrangements with key sector partner organizations in wealth management, insurance and credit cards.

Summary of questions related to Business Arrangements Survey

Strategic Partners. A member inquired if future survey questions related to prominent sector partners (i.e., Aviso, CUMIS and Collabria) would be directed to the credit unions and their partner organizations. FSRA indicated that future surveys will likely include both sector and partner directed questions. FSRA wants to better understand the sector’s relationship with these types of institutions and the institutions themselves.

Service Standards: A member recommended that FSRA include questions related to service standards for strategic partners. FSRA indicated that it will consider this suggestion for future surveys.

Approach Guidance: Business and Investment activities

Overview

FSRA provided an overview of the draft approach guidance for Approval or Authorization of Business and Investment Activities under the Credit Unions and Caisses Populaires Act, 2020 (Business and Investment Activities) guidance. The draft Business and Investment Activities guidance details the proposed approach FSRA will take when considering applications by credit unions for the approval of business and investment activities.

The draft guidance outlines the principles and criteria that FSRA will apply when reviewing applications. Additionally, the draft guidance details the following elements:

  • Submitting Applications
  • Meeting with FSRA
  • Service Standards
  • Contents of Application
  • Associated Approvals
  • Refusal to Approval

FSRA requested the TAC provide input on the draft Business and Investment Activities guidance.

Summary of questions related to the Business and Investment Activities Guidance

Grandfathering Investments. A member requested clarification whether this guidance will apply to existing investments. FSRA indicated that the draft Business and Investment Activities guidance is based on new powers detailed in the Credit Unions and Caisses Populaires Act, 2020 and will be applied to new activities that credit unions wish to undertake. Existing investments and business activities that have already been approved will not be reconsidered under the new process.

Substantial Investments. A member requested clarification on what is considered a substantial investment. FSRA clarified that under the proposed regulation, a substantial investment of a body incorporate is when the credit union would be acquiring more than 30 per cent of voting rights or more than 30 per cent of the shareholders’ equity of the body corporate.

Operational Guides: A member inquired whether FSRA will be developing guides to support the application process. FSRA intends to develop a guide for the application process which will be released once the Business and Investment Activity guidance comes into force. The guide will list the information that should be submitted for each type of application and will be posted on FSRA’s website.  

Loan Default Securities. A member recommended that the guidance further contemplate materiality and proportionality as it relates to securities acquired as a result of a loan default. FSRA indicated that it will consider this suggestion.

Sale of Insurance. A member inquired whether the sale of insurance will be captured in the Business and Investment Activity guidance. The sale of insurance, and any potential limitations, will be captured in the regulation, which has not yet been finalized. The guidance will only capture business activities for which regulatory approval is required.

Interpretation and Approach Guidance: Resolution Planning

FSRA provided an overview of the draft Resolution Planning guidance. In the interpretation section, the Resolution Planning guidance describes FSRA’s interpretation of legislative requirements for large credit unions (i.e., those with assets greater than $1 billion) to develop and maintain resolution plans. In the approach section, the guidance details FSRA’s supervisory approach for assessing a credit unions adherence with resolution planning requirements.

The draft guidance details the following core elements that should exists in a credit union’s resolution plan to meet the objectives stated in the Resolution Planning guidance:

  • Resolution Profile
  • Resolution Strategy
  • Internal and External Dependencies for Operational Continuity
  • Divestiture Considerations
  • Funding Sources and Financial Exposures
  • Data Capabilities
  • Plans to Address Impediments

FSRA requested the TAC provide input on the draft Resolution Planning guidance.

The draft guidance will be released for public consultation on January 5, 2022 with the consultation period open until February 18, 2022.

Summary of questions related to the Resolution Planning Guidance

Non-Viability. A member asked if there is a specific indicator or trigger that would result in a credit union being non-viable. FSRA explained that there is not a single indicator or trigger and a credit union reaching the point of non-viability would likely be the result of many issues.  

Proportionality. A member inquired as to whether FSRA would adopt the same standards for credit union resolution planning that are currently applied to large international banks. FSRA clarified that resolution planning requirements for Ontario credit unions should reflect the institutions’ size, complexity and risk profile.

Timing: Members asked for additional details on the timing to implement a resolution plan. Credit unions to which the guidance is applicable will be required to provide FSRA with an interim submission in April, 2023 with the final submission being required in January, 2024.

Burden: A member expressed concern with the requirement for credit unions with assets greater than $1 billion to develop resolution plans, as it would introduce additional burden to the sector. FSRA explained that, to promote safety and soundness in the system, it is imperative that larger institutions undertake resolution planning.  Resolution planning frameworks have been adopted and implemented in other jurisdictions with modernized regimes.

Next steps

FSRA will review and consider the feedback received from the public consultation on the discussed guidance before finalizing.

Attendance record

Invited/Attended

Company Name

Attendance Status
(A)ttended; (R)egrets; (S)ubstitute;

Daniel Padro

FSRA

A

Mehrdad Rastan

FSRA

A

Brian Mullan

FSRA

A

Alena Thouin

FSRA

A

Steve Kokaliaris

FSRA

A

Antoinette Leung

FSRA

A

Kirk Quinn

FSRA

A

Catherine Tam

FSRA

A

Bradley Hodgins

FSRA

A

Cheryl Allison

FSRA

A

Daniel Friedman

FSRA

A

Kerry-Ann Alleyne

FSRA

A

Chris Georgakopoulos

FSRA

A

Charles Barone

FSRA

A

Michele Anderson

FSRA

A

Joshua Lerner

FSRA

A

Calvin Johansson

FSRA

A

Shivdeep Panaich

FSRA

A

Sandor Szalai

FSRA

A

Peter Stavropoulos

FSRA

A

Joanna Wearing

FSRA

A

Lily Li

FSRA

A

Kelly Brunn

FSRA

R

Brigitte Elie

FSRA

A

Rhona Poliard

FSRA

R

Ellen Kaross

FSRA

R

Sabena Sandhu

Canadian Credit Union Association

A

Sandy Ferguson

Mainstreet Credit Union

A

Harry Joosten

Governance Vitality

A

Janet Johnson

Libro Credit Union

A

Anthony D’Errico

Italian Canadian Savings Credit Union

A

Bernard Brun

Caisse Populaire Desjardins

A

Luc Racette

Caisse Alliance

A

Allison Kasper

Copperfin Credit Union

R

Jose Gallant

Alterna Credit Union

A

Riz Ahmad

DUCA Financial Credit Union

A

Richard Adam

Northern Credit Union

A

Vadim Gracie

BDO Canada LLP

A

Sunny Sodhi

Meridian Credit Union

 A

Anita Saar

Northern Birch Credit Union

 A

Roger Gauthier

FSRA Consumer Advisory Panel

 R

Mike Howard

Picuz Solutions

 A