This post was written prior to our January 2017 merger, under our previous firm name, MacPherson Leslie & Tyerman LLP.
The is part of a series of blog posts reviewing some of the key legal implications associated with a Saskatchewan credit union continuing federally. This post focuses on legislative measures that have been proposed by the Federal Government to provide provincial credit unions with protection against transitional risks and to facilitate a smooth continuance.
Federal Legislation to Assist with Transition Challenges
As noted in an earlier blog in this series, in 2014, the Federal Government indicated it would provide temporary transitional support to eligible provincial credit unions to enable them to continue to operate seamlessly under federal regulation (you can read the announcement here). Earlier this year, in the 2016 Budget, the Federal Government again recognized that credit unions considering the federal framework may face transition challenges, and indicated that it would propose legislative measures to provide targeted protection against transitional risks and to facilitate a smooth entry process (you can read the relevant portion of the 2016 Budget here). Some of these legislative measures were introduced earlier this year and are now in force.
More specifically, the government introduced some of these measures in Bill C-15, also known as “An Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures” or “Budget Implementation Act, 2016, No. 1“. The legislative measures include three main measures to address the transitional risks.
In particular, Division 4 of Part 4 of the Budget Implementation Act, 2016, No. 1 adopts the following measures:
- First, the Minister of Finance has the ability to exempt applicants from a federal technical or procedural requirement relating to a continuance so long as there is “substantial compliance” with the requirement.
- Second, the Minister of Finance has the authority to exempt federal credit unions from certain technical or procedural corporate governance requirements relating to voting for up to three years after entry, provided there is “substantial compliance” with the requirement.
- Third, the Minister of Finance has the authority to offer a transitional loan guarantee to a loan that a federal financial institution makes to a federal credit union. This guarantee is for the purpose of supporting the federal credit union through the first three years following its federal continuance. This measure is intended to address the potential challenge inherent in shifting from a provincial framework with unlimited deposit insurance to the federal framework that offers considerably less deposit insurance.
The Budget Implementation Act, 2016, No. 1 receive Royal Assent and became law on June 22, 2016.
It will be interesting to see whether these legislative measures are sufficient to encourage interested provincial credit unions to proceed through the federal continuance process, and whether additional legislative measures will be introduced in the future.
Federal Guidance on the Continuance Process
Earlier this week, OSFI released a “Guide for Continuing a Local Cooperative Credit Society as a Federal Credit Union“. You can read the guide here. The Guide is intended to promote awareness and enhance the transparency of the continuance process. The Guide will be useful to Saskatchewan credit unions considering the federal continuance process as it outlines the continuance process, application contents, and evaluation criteria in more detail.
Credit unions interested in continuing federally may wish to consult with legal counsel regarding the continuance process.