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Meridian Online Bank Launching in 2018
August 17, 2016
7:19 am
frizun
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Looks like Meridian want to start competing with the big five.

http://business.financialpost......n-big-five

August 17, 2016
7:48 am
rodeworthy
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Interesting.....

I like the part in the article about Ontario working to raise deposit insurance to $250,000 from the current $100,000. That makes a lot of sense and make life a lot easier for some who need to maintain multiple accounts to be insured.

More online banks seems to be the trend. Will the Big 5 ever respond?

August 17, 2016
11:12 am
Loonie
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The Big Bsnks are already responding. Don't forget that Scotia owns Tangerine; CIBC has some arrangement with PC Financial; I think they have all been closing branches; etc. It may even be that they all offer some kind of online banking, but I have not looked into that. They are always happy to cut their expenses, and online banking is surely cheaper for them to operate.
What they won't offer, however, is competitive interest rates to some of the institutions (both CUs and small banks) that are the leaders. It remains to be seen whether Meridian will do so.

Edited to add (after reading the article):
Higher deposit insurance for Ontario CUs will be a big advantage in building their deposits. It's about time. There is no good reason it shouldn't be unlimited, in my opinion - as is the case in MB and apparently in BC as well. Total amount on deposit is all that matters, not the size of each individual account.

I hope Meridian is able to offer truly competitive rates for savers, which they have not always done in the past. If they are just going to offer the same kind of deal as the Big Five but with higher deposit insurance, it really won't matter much to me. I have never understood why Ontario CUs generally offer such low rates, considering that they don't have to pay out to shareholders. I believe Meridian does, however, offer an annual dividend to members based on profitability. Does anyone know what the history of that has been so far?
Offering all these extra services and more physical locations is going to cost them a lot of money, making them look more and more like traditional banks. I don't think I really understand the business plan here. It sounds more like Desjardins than Hubert or even Oaken.

August 17, 2016
11:03 pm
Norman1
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Meridian Bank will be a new federal bank, wholly-owned by the existing Ontario-based Meridian Credit Union Limited. Similar to Alterna Bank and its parent Alterna Savings & Credit Union Limited.

Meridian Bank won't have higher deposit insurance limits. Like any other federal bank, it will be subject to CDIC rules and limits.

August 18, 2016
8:45 am
NorthernRaven
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Loonie said
Higher deposit insurance for Ontario CUs will be a big advantage in building their deposits. It's about time. There is no good reason it shouldn't be unlimited, in my opinion - as is the case in MB and apparently in BC as well. Total amount on deposit is all that matters, not the size of each individual account.

Don't forget that banks pay a premium to the guarantee corp for the insurance. For CDIC, only about 30% of total deposits are covered by insurance. Unlimited coverage would mean a hefty new insurance cost for the big banks, with likely little gain - the big money is there anyway, and they probably won't get much new business because of increased insurance.

Credit unions don't have the sort of big whale and treasury clients, so the provincial guarantees cover a much larger percentage of deposits - DICO runs a bit over 70%, I think. But unlimited coverage would still cost them more, and the increase in business might not be worth it, or DICO might be leery of going in this direction. There's also the various "moral hazard" arguments.

August 18, 2016
9:21 am
Koogie
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Loonie said

Edited to add (after reading the article):
Higher deposit insurance for Ontario CUs will be a big advantage in building their deposits. It's about time. There is no good reason it shouldn't be unlimited, in my opinion - as is the case in MB and apparently in BC as well. Total amount on deposit is all that matters, not the size of each individual account.

Actually in this case, the proposed legislation REDUCES coverage for some accounts. DICO currently covers eligible RRSP and TFSA deposits on an Unlimited basis. The changes would reduce that coverage to $250,000 and make them inline with non registered deposits.
Depending on where you hold your fixed income and in what amount, this will actually be to your possible detriment.

August 18, 2016
9:37 am
NorthernRaven
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A TFSA account with $250K of DICO-insurable product would be a multiple standard deviation outlier - it most likely doesn't exist. RRSPs might be plausible, but probably relatively rare, given the joint-spouse provisions and so on. Most people with those kinds of insurable RRSP holdings won't have them in a single CU; more likely a brokerage RRSP with access to multiple issuers.

August 18, 2016
11:06 am
Loonie
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Norman1 said

Meridian Bank will be a new federal bank, wholly-owned by the existing Ontario-based Meridian Credit Union Limited. Similar to Alterna Bank and its parent Alterna Savings & Credit Union Limited.

Meridian Bank won't have higher deposit insurance limits. Like any other federal bank, it will be subject to CDIC rules and limits.

Alterna Bank is not listed as CDIC-insured at this time.
http://www.cdic.ca/en/about-di.....aQodHQcAAg
So, I don't understand why you think Meridian would be.

August 18, 2016
11:12 am
NorthernRaven
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Loonie said
Alterna Bank is not listed as CDIC-insured at this time.
http://www.cdic.ca/en/about-di.....aQodHQcAAg
So, I don't understand why you think Meridian would be.

Actually, they are listed, as "CS Alterna Bank" - Alterna was apparently the result of a merger between "CS Co-op" and "Metro Credit Union".

August 18, 2016
11:16 am
Hoodie
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Loonie said

Norman1 said

Meridian Bank will be a new federal bank, wholly-owned by the existing Ontario-based Meridian Credit Union Limited. Similar to Alterna Bank and its parent Alterna Savings & Credit Union Limited.

Meridian Bank won't have higher deposit insurance limits. Like any other federal bank, it will be subject to CDIC rules and limits.

Alterna Bank is not listed as CDIC-insured at this time.
http://www.cdic.ca/en/about-di.....aQodHQcAAg
So, I don't understand why you think Meridian would be.

Check under C's
CS Alterna Bank - my $5K is safe!

August 18, 2016
11:27 am
Loonie
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Thanks! (Why not just change your official name to Alterna, if that's how you want to be known?sf-confused).
So why does the article in FP talk about a 250K limit in regards to Meridian's bank?

I guess they must have been referring only to the "old" Meridian - the CU. I find all of this very confusing.

So, now it seems that, if these deals go through, you might get 250K with the CU part, but only 100K from the bank part. I don't think either Alterna or Meridian has done a great job of explaining the structures.

I'm having trouble seeing that there is anything much in this for the ordinary person. According to the article, Meridian wants to go after corporate accounts / small business. I know there is a need there, but it won't do anything for me. Used to have corporate accounts at Alterna CU but can't imagine what else they could do if it were a bank that would have mattered to us.

August 19, 2016
7:44 am
Norman1
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Loonie said
Alterna Bank is not listed as CDIC-insured at this time.
http://www.cdic.ca/en/about-di.....aQodHQcAAg
So, I don't understand why you think Meridian would be.

NorthernRaven said
Actually, they are listed, as "CS Alterna Bank" - Alterna was apparently the result of a merger between "CS Co-op" and "Metro Credit Union".

That merger occurred in 2005 and resulted in the name change to Alterna Savings & Credit Union Limited.

However, it looks like the Civil Service Co-operative Credit Society (the CS CO-OP) had the CS Alterna Bank way before that.

According to note #153 of CPA Rule D4 (Institution Numbers and Clearing Arrangements), the Ontario loan company Civil Service Loan Corporation became the federal CS Alterna Bank in October 2000:

153 Effective October 2, 2000, Civil Service Loan Corporation (#608) received Letters Patent of continuance, allowing it to continue its operations as a Schedule II Bank under the Bank Act. The new name of the bank is CS Alterna Bank (in French “Banque CS Alterna”). CS Alterna Bank will continue to use institution number 608.

August 19, 2016
7:49 am
Norman1
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Loonie said

I'm having trouble seeing that there is anything much in this for the ordinary person. According to the article, Meridian wants to go after corporate accounts / small business. I know there is a need there, but it won't do anything for me. Used to have corporate accounts at Alterna CU but can't imagine what else they could do if it were a bank that would have mattered to us.

I think it is more for Meridian than its members.

It allows Meridian CU to open Meridian branches, run by Meridian Bank, outside of Ontario. At the same time, they get to continue to sell insurance in their Meridian CU branches in Ontario, which banks are not allowed to do.

August 19, 2016
3:52 pm
Loonie
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If there insurance is anything like that offered by the banks, I can only say "buyer beware". I'm thinking particularly about travel insurance.
Insurance should only be bought from persons who are licensed to sell insurance, as they have a code of ethics that requires them to make an effort to advise in your best interests. Insurance can be sold by employees who are not licensed to sell it.

August 19, 2016
6:30 pm
Norman1
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I think the provincially-regulated credit unions, like Meridian CU, are allowed to have licensed insurance agents in their branches.

The banks would love to do the same. But, federally-regulated banks (and any future federally-regulated credit unions) are not allowed to have licensed insurance agents in the branch. I think the closest thing they can do is to have them next door. I've seen an RBC Royal Bank branch adjacent to an RBC Insurance office.

August 19, 2016
7:50 pm
Norman1
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My impressions were dated.

Ontario credit unions, like Meridian CU, are no longer allowed to have licensed insurance agents in their branches. It looks like Ontario changed the rules around 1995 and made the restrictions more like the federal restrictions.

This is from the current regulations to the Ontario Credit Unions and Caisses Populaires Act, 1994:

Authorized types of insurance

35. (1) For the purpose of subsection 176 (1) of the [Credit Unions and Caisses Populaires]Act, [of 1994] a credit union may administer any of the following types of insurance policies offered by insurers that are licensed to carry on business offering that type of insurance policy:

1. Insurance related to a credit card or charge card issued by the credit union.
2. Creditors’ disability insurance.
3. Creditors’ life insurance.
4. Creditors’ insurance for loss of employment.
5. Creditors’ vehicle inventory insurance.
6. Export credit insurance.
7. Group accident and sickness insurance.
8. Group life insurance.
9. Mortgage insurance.
10. Travel insurance. O. Reg. 237/09, s. 35 (1).

(2) A credit union that, on March 1, 1995, administers an insurance policy other than one authorized under subsection (1) may continue to administer the policy with respect to a person to whom coverage is provided on that date. O. Reg. 237/09, s. 35 (2).

Advice about insurance

37. (1) A credit union may provide advice about an authorized type of insurance. O. Reg. 237/09, s. 37 (1).

(2) A credit union may provide advice in respect of another type of insurance only if,

(a) the advice is general in nature; and
(b) the advice is not about a specific risk, a particular proposal respecting life insurance or a particular insurance policy, insurer, agent, broker or service. O. Reg. 237/09, s. 37 (2).

(3) A credit union may provide services in respect of an authorized type of insurance. O. Reg. 237/09, s. 37 (3).

(4) A credit union may provide services in respect of another type of insurance only if the credit union does not refer a person to a particular insurer, agent or broker. O. Reg. 237/09, s. 37 (4).

August 19, 2016
7:53 pm
Loonie
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.Deleted since my post referred to Norman's post 15 above.

August 19, 2016
8:29 pm
Loonie
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NorthernRaven said

Loonie said
Higher deposit insurance for Ontario CUs will be a big advantage in building their deposits. It's about time. There is no good reason it shouldn't be unlimited, in my opinion - as is the case in MB and apparently in BC as well. Total amount on deposit is all that matters, not the size of each individual account.

Don't forget that banks pay a premium to the guarantee corp for the insurance. For CDIC, only about 30% of total deposits are covered by insurance. Unlimited coverage would mean a hefty new insurance cost for the big banks, with likely little gain - the big money is there anyway, and they probably won't get much new business because of increased insurance.

Credit unions don't have the sort of big whale and treasury clients, so the provincial guarantees cover a much larger percentage of deposits - DICO runs a bit over 70%, I think. But unlimited coverage would still cost them more, and the increase in business might not be worth it, or DICO might be leery of going in this direction. There's also the various "moral hazard" arguments.

Yes, I agree that the banks wouldn't want to pay for any more insurance. I think the reasons for that are obvious. They define their responsibility as paying as little as possible anyway, and, yes, it wouldn't bring them any more business because there is no competitive advantage.

DICO could do it. If it weren't for the fact that MB and BC do it, we would almost certainly be being told that it was impossible.

The reason they could do it is not just the relative lack of big ticket members, although I'm sure that's a factor. For me, it only makes sense that they could do it. Being supposedly responsive to members' needs, unlike banks who are responsible to investors, they ought to. I see no difference between 10 members who each deposit 500K and 50 who deposit 100K. Both add up to 5,000,000 needing to be insured. It's the dollars, not the dollars per member, that need to be insured.

Both of these insurance systems, CIDC and the CU ones, seem to be based on the maximum size of the majority of deposits. It doesn't really have much to do with how much insurance could be offered. If there were enough public pressure, they would likely be increased again.

August 20, 2016
1:08 pm
Norman1
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Loonie said

…. I see no difference between 10 members who each deposit 500K and 50 who deposit 100K. Both add up to 5,000,000 needing to be insured. It's the dollars, not the dollars per member, that need to be insured.

Both of these insurance systems, CIDC and the CU ones, seem to be based on the maximum size of the majority of deposits. It doesn't really have much to do with how much insurance could be offered. If there were enough public pressure, they would likely be increased again.

I think that's on purpose. The current best practices for deposit insurance is to fully insure most of the depositors while leaving most of the deposited money uninsured. I wrote about those recommendations from the International Association of Deposit Insurers in these earlier posts.

There's probably a feeling from the government that those who are depositing upwards of $500K, $1 million, and $5 million should be doing due diligence and taking responsibility for the risk they are taking with their deposits.

I would agree with the moral hazard issue. When there's zero risk to members' deposits as a result of unlimited deposit insurance, then the credit union members can take a "What? Me worry?" towards how their credit union is run and how it loans out the deposited money. Why wouldn't the members make the lending criteria as lax as possible for themselves to qualify for a loan?

August 20, 2016
2:04 pm
Loonie
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I don't see why people should be discriminated against just because they have larger deposits. That's what it amounts to, if you're saying that because they have bigger deposits, they must take more risk.
It's just a nuisance, making people maintain accounts in more institutions than they really need or want to.
If someone has 500K and they deposit it in 5 or 6 different FIs in order to meet the insurance criteria, they are eliminating the "risk" of depositing 500K, but they are still depositing 500K and being insured on all of it. The only real limits to how much you can have insured are the number of FIs in which you can deposit it and the number of joint accounts you can set up.

I think a CU would get in trouble with CU Central and/or the Deposit Insurance Corp if they had unrealistic lending criteria.

As far as "Best Practices" are concerned, I have to take that with a grain of salt. Best Practices is what results when people with power agree with each other in such a way as to limit their liability. It happens in various walks of life. It is never intended to protect the consumer, only the institution and the practitioner - whether one agrees with it or the process or not.

Consumers need to make their voices heard and not just quietly accept institutional arguments, or the limits will never be raised.

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