Thursday, July 12, 2012

Canadian Proposal on Charter Choice

The Canadian Parliament passed legislation in 2010 creating an optional federal charter for credit unions. Currently, credit unions are regulated exclusively by the provinces.

The Canadian Department of Finance on July 6 released proposed regulations that would implement the federal credit union legislative framework.

The proposed federal charter will make it easier for Canadian credit unions to expand nationwide. But Canadian credit unions that opt for a federal charter would be supervised by the Office of the Superintendent of Financial Institutions -- the regulator of the Canadian banks. They would also be under the same insurance fund as Canadian banks.

Furthermore, the legislation provided a pathway for a federal credit union to convert to a bank with common shares.

The proposed regulation dealing with charter choice specifies the process and disclosure required for a federal credit union to change its legal form from a company owned by members to one owned by shareholders. The proposal contains a series of requirements that must be followed to ensure the process is fair and restricts management from benefiting unduly from the conversion transaction.

It is unclear how many credit unions will opt for the federal charter or will seek to change their legal form to one owned by shareholders.

Read the conversion proposal.


  1. Concise, informative, even-handed piece about credit unions. Nicely done, Keith.

    Other than possible enhanced access to capital and potential enrichment to insiders, it's not clear what purpose this legislation and implementing regulations will serve, however.

  2. Sounds like Canadian credit unions want a national field of membership and are willing to convert to get it. They already have access to capital and pay taxes.

  3. Please outline the full meaning of the entry in the 2013 Federal Budget on Pages 144-145, in where Canadian banks can manipulate bank liabilities to banking instruments such as bonds in order to recapitalize existing bank shortfalls in liquidity. I am also concerned with this provision as it pertains to the new Federal Credit Union changes and inclusion in the Bank Act. Thank you for your time I await a convenient response.



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