No bank for Canadian credit unions, Eh?
This rule enforcement could be the catalyst needed for CUs to get back to their cooperative roots
By now you’ve heard the news that Canadian credit unions will no longer be allowed to use the “B” word to describe what they do. An advisory issued on June 30 by the federal Office of the Superintendent of Financial Institutions takes a strict interpretation of the Bank Act. Based on this interpretation, the federal government could lay criminal charges against any credit union that uses the term “bank,” “banker” or “banking.”
Here’s an excerpt from a response from the Canadian Credit Union Association: “Provincially regulated, credit unions have operated in Canada since 1908 and have evolved to provide the same lending, deposit-taking and wealth management services as federally chartered banks. They have the same–or higher–deposit protection as banks, and operate in 380 communities that are not locally served by Canada’s largest banks. And credit unions have used the verb ‘bank’ and the term ‘banking’ to describe what they do, without penalty, for years with the tacit support of federal officials.”
Why now? The largest credit unions in Canada have grown to a significant size and a new federal charter is enabling some of the largest credit unions to pursue a national expansion strategy. Plus, with the advent of so many non-bank, unregulated fintech startups hitting the market, the big banks, lead by the Canadian Bankers Association, have lobbied hard to OSFI to enforce the rules. Unfortunately, credit unions are lumped into the non-bank category even though they are regulated.continue reading »