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Email this9:52 pm
April 11, 2020
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Hello,
How strong or weak do you rank the unlimited guarantee for BC CUs? From my research, I understand that e.g. in BC there is an explicit guarantee by the BC Govt. How is it in MB or ON?
11:13 pm
August 4, 2010
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Credit unions have internal capital buffers, parts of their mortgage holdings are guaranteed by CMHC, etc. If a major credit union were to actually become insolvent, the provincial guarantee corporations funds usually total over 1% of deposits, which could handle a significant requirement to support the system. And in places like BC or Manitoba, where credit unions are a major part of the financial system, it is extremely difficult to envision them being left to collapse, to the extreme detriment of the provincial economy.
Nevertheless, from a purely "interesting question" angle, it would appear that the provincial guarantee corporations are not explicitly themselves guaranteed by their governments. In BC, for example, if you look at section 271 of the Financial Institutions Act, it says that the government ("Lieutenant Governor in Council") may enter into a guarantee of indebtedness to backstop the fund, not that it must. Most provincial systems seem to be in a similar situation, whereas the federal CDIC is an "agent of the Crown", and generally seems to be a legal obligation of the federal government.
8:13 am
April 6, 2013
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If someone has found an "explicit guarantee" from the BC government, then please share it. I think there would be lots of people interested in seeing that statement from the government.
The most I've found is that the BC government has given the Credit Union Deposit Insurance Corporation of British Columbia a $200 million line of credit.
9:00 pm
April 11, 2020
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Thank you, correct.
I missed paragraph (5) of Section 271:
(5)Despite section 72 of the Financial Administration Act or the regulations referred to in that section, the Lieutenant Governor in Council, if in concurrence with the Authority's opinion that the fund is impaired, may
(a)specify the amount that the Lieutenant Governor in Council considers necessary to repair the fund, and
(b)direct that the Minister of Finance on behalf of the government enter into a guarantee of indebtedness that the deposit insurance corporation incurs to repair the fund
(i)on terms approved by the Lieutenant Governor in Council, and
(ii)not exceeding the amount specified under paragraph (a).
(6)If the Minister of Finance receives a direction under subsection (5), the Minister of Finance must enter into the guarantee in accordance with the direction.
9:14 pm
October 21, 2013
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Norman1 said
If someone has found an "explicit guarantee" from the BC government, then please share it. I think there would be lots of people interested in seeing that statement from the government.The most I've found is that the BC government has given the Credit Union Deposit Insurance Corporation of British Columbia a $200 million line of credit.
Which FI gave them the line of credit?
Of course, lines of credit can be withdrawn...
9:53 pm
April 6, 2013
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Note 9 (Credit facilities) of the March 31, 2019 audited financial statements mentions two lines of credit:
- $200 million line of credit for liquidity from the BC Ministry of Finance.
- $250,000 operating line of credit from Central 1 Credit Union.
Consumer lines of credit can be withdrawn because they are non-committed ones.
In contrast, committed lines of credit cannot be withdrawn, except according to specific terms in the agreement. One has a committed line of credit if one is paying a standby fee for it.
9:59 pm
August 4, 2010
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Loonie said
Which FI gave them the line of credit?Of course, lines of credit can be withdrawn...
From the 2018/2019 CUDICBC Financial Statement:
The Corporation also has available a liquidity line of credit with the British Columbia Ministry of Finance to support deposit insurance operations. The maximum available, [$200,000,000], is limited to the lesser of the maximum authorized by the directors of the Corporation, the Lieutenant Governor in Council pursuant to Section 53 of the Financial Administration Act (FAA) or 80% of the fair market value of the investments. Advances are not secured, and confirmation of investment holdings is required prior to advances. Advances would be required to be repaid from the sale proceeds of the Corporation’s investments.
It's just a liquidity thing - if they had to sell some of their investments to pay out on guarantees, the government could give them immediate cash upfront (which would have to be paid back) while they take the time to sell off the investments.
9:31 am
April 15, 2020
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Fritz23 said
Hello,
How strong or weak do you rank the unlimited guarantee for BC CUs? From my research, I understand that e.g. in BC there is an explicit guarantee by the BC Govt. How is it in MB or ON?
The limits in ON are $100,000 for CDIC.
10:03 am
August 4, 2010
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November 7, 2014
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Bud said
Head of dgcm comments
https://www.theglobeandmail.com/investing/markets/inside-the-market/article-how-safe-are-deposits-in-those-high-rate-savings-accounts-offered-by/
Just a suggestion: If you want us to read an article from a source that requires a subscription, copy and paste the article, not the link. Thanks.
4:34 pm
December 12, 2009
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gicjunkie said
Just a suggestion: If you want us to read an article from a source that requires a subscription, copy and paste the article, not the link. Thanks.
* Subject to the Fair Dealing provisions of Canada's Copyright Act, which provides for fully 10% of each article to be copied and pasted. So long as multiple members are not each copying and pasting 10% of the article to paste the full article, it should also be permissible for two members to include in their separate posts or replies different portions of the article, so long as each is quoted 10% or less, if each is providing critical commentary, appraisal, review, and/or analysis about different portions of the article.
As well, to add to what @gicjunkie says, don't quote The Globe and Mail unless no other source provides the same information. In other words, use other sources first. Besides, The Globe is reportedly doing very well in comparison to the Star or the Financial Post, the latter of which is a better written paper than either of the three in my opinion, so why give the Globe the clicks when they don't need it? In any case, please do as @gicjunkie and others has/have suggests/suggested and quote portions of the linked article. Don't simply, for sake of brevity and being quick to post, share an URL with little to no context. It's not helpful.
Cheers,
Doug
8:58 pm
October 15, 2015
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There was an article by Rob Carrick on manitoban credit unions. I dislike copying secured articles but here is the pertinent section. Hope this hasn't been posted already.
DGCM’s annual report says it had assets of $367.3-million as of Dec. 31 that were mostly invested in government bonds with maturities of one to five years. A small portion is held in stocks for long-term growth. It’s important to remember that a troubled credit union would likely have assets to sell off, which can limit the actual amount of assistance required from the reserve fund.
Mr. MacNeill said the reserve fund is only one aspect of how depositors are protected. Manitoba credit unions are required to meet standards for financial solidity that are similar to those applied to banks by the federal Office of the Superintendent of Financial Institutions. DCGM also has the ability to take proactive steps, such as arranging a merger of a troubled credit union with a healthy entity.
According to Mr. MacNeill, Manitoba credit unions run less risky businesses than the big banks because lending to volatile sectors such as energy, tourism and airlines is minimal. He added that Manitoba’s economy is well-diversified and not subject to boom-bust cycles.
9:11 pm
February 20, 2018
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You missed a paragraph chris
"DGCM is not part of the Manitoba government, which in turn is not subject to a legislative requirement to guarantee deposits at provincial credit unions. But Mr. MacNeill said DGCM has the power to request government assistance in covering a member insolvency. "We expect the government would definitely look favourably on that." he said.
3:40 pm
April 6, 2013
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Of course, DGCM can contact the Manitoba government for help.
It doesn't mean the government would write a cheque to them for whatever they request without conditions.
There's a big difference between a power to "request" and a power to "obtain".
Please write your comments in the forum.