Mortgage brokers shouldn’t worry that credit unions opting for federal regulation will morph into big, bad banks, says the head of one industry association.
“That won’t happen,” says David Phillips, president and CEO of Credit Union Central of Canada.
Still, OSFI regulations governing banks, including B-20, comes along with the option of federal charter status credit unions have now won.Those more stringent underwriting guidelines could potentially constrain how credit unions currently operate.
But Phillips doesn’t see the guidelines turning Credit Unions from Dr. Jekyll of the lending world into its Mr. Hyde.
“I don’t see federal status undermining their strength as a local lender; they know the community, and have done very well to compete against the big banks,” he told MortgageBrokerNews.ca. “Credit Unions have won the best banking award eight years in a row – they aren’t about to throw away what is successful.”
The regulations permitting credit unions to apply for a federal charter came into effect on December 19 of last year, after two years of the CUCC and the Department of Finance working to develop a federal credit union option.
Phillips says that the interest shown by credit unions across Canada has been “strategic in nature,” as they are looking at the long term to determine what approach they will take.
He wagers that it may be five years before we see a credit union finally attain federal status, considering an application and approval process through OSFI that takes two to three years.
The federal option is necessary, says Phillips, as it will allow credit unions the freedom to compete on a national level.
“It limits the credit unions, having to operate within provincial borders,” he points out. “The marketplace is one of mergers, and to have the mechanism in place to allow credit unions to merge across Canada is necessary.”
As the national trade association for Canadian credit unions, the CUCC represents five provincial/regional centrals and one federation, representing 348 credit unions with more than $145.7 billion in assets and serving more than 5.2 million members outside of Quebec.