On January 24, 2014 the Minister of Finance announced the Government’s intention to provide temporary transitional support to eligible provincial credit unions that have provincial acceptance to become federal credit unions. Specifically, it was announced that the Government will offer:
- extended deposit insurance;
- a short-term funding facility; and
- an extended transition period to comply with federal insurance networking rules.
The specific terms of these measures are to be developed.
The Minister of Finance has written a letter to Credit Union Central of Canada, which is publicly available, informing it of the temporary transitional support and inviting it to participate in the consultation process. This letter notes that a number of credit unions have expressed interest in using the federal framework but have indicated there are challenges in doing so as a result of differences in provincial and federal deposit insurance coverage and, in some provinces, differences in insurance networking rules (specifically, some provinces allow credit unions to share premises with insurance affiliates, which is not permitted under the Bank Act).
The federal credit union framework came into force in 2012 but no federal credit union has come into existence yet. It is clear that the Government is being flexible to enable and encourage provincial credit unions to become federal credit unions under the Bank Act. It will be interesting to see what specific measures are decided upon and whether they will lead to one or more provincial credit unions making the move to the federal jurisdiction.