Thank you.
Good evening, Mr. Chair and distinguished members of the committee. Thank you for the opportunity to share with you the perspective of credit unions so that it may receive consideration in the committee's report.
Before I begin, some of you may not yet be familiar with the recent change in the credit union system. Last month the Canadian Credit Union Association, which I represent, replaced Credit Union Central of Canada as the new national voice for credit unions and caisses populaires outside Quebec. The transformation has been part of a collaborative process over a number of years to build a national association and a national voice for the 316 credit unions in Canada.
More than 5.6 million Canadians, or one in five outside Quebec, trust a local credit union for their day-to-day banking activities. Collectively, credit unions employ more than 27,000 Canadians and are the only financial institution in more than 380 communities. They are important pillars of the economy, managing over $186 billion in assets, 7% of the mortgage lending in the market outside Quebec, 11% of the small business market, and 11% of lending to the agricultural centre, and that's higher in some of the western provinces. What's more, our members continue to rank the highest in surveys about service to small businesses.
With the right policy frameworks, credit unions can partner with the public and private sectors to provide investment that will create sustainable growth and economic opportunity. I'll go through individually our three recommendations for the budget to help build those frameworks.
First, implement or enhance the federal loan guarantee programs to support credit union lending. Credit unions believe the federal loan loss guarantees can be a cost-effective approach to provide lending to underserved individuals and priority sectors of the economy. We believe this because we're proud to have demonstrated the success in guarantee-based programs.
The foreign credential recognition pilot program is one example where 36% of new Canadians encounter financial barriers to getting their foreign credentials recognized, yet through this program the federal government, community organizations, and credit unions are helping foreign-trained individuals cover the cost of the credentialling process. As of March 2015, five credit unions have made more than 333 loans, backed by the government, to skilled, new Canadians to help them pursue training to work in their professions when they are in Canada. As a result of this pilot program, 110 loan recipients completed their certification training and are working in their field or in a related field. We recommend the federal government expand this program and make it permanent in budget 2016.
Similarly, because of our local roots, credit unions have experienced supporting social and community infrastructure projects and have a solid relationship with municipalities and community agencies. We recommend the government's proposed infrastructure bank include loan guarantees to allow credit unions to help deliver vital social infrastructure projects.
Secondly, the 2014 budget set out transitional measures to support credit unions that wanted to migrate from a provincially regulated regime to a federal one.
These measures included proposals for extended deposit insurance guarantees, transitional funding support, and extended insurance retailing powers to assist credit unions interested in doing so to move from the provincial sphere to the national sphere.
We recommend that the federal government clarify in the budget the parameters around this proposed transitional measure for federal credit unions. Clarity will further define the legislative framework established in 2012 and promote the government's objective of enhancing domestic competition in the banking and financial services sector.
Finally, implement a new tax measure to help credit unions build capital. Like chartered banks, credit unions are required to hold large amounts of capital, but unlike chartered banks, credit unions rely primarily on retained earnings to meet these requirements. To help credit unions grow their retained earnings and ensure competitive balance in the tax system, we recommend that the federal government implement a new capital growth tax credit for credit unions. This tax measure would help credit unions lend to middle-class Canadians and create local jobs in rural and urban areas, while meeting increased regulatory capital requirements. Our estimate on this measure would result in $34 million in forgone tax revenue, but that would generate an additional $418 million in lending to small business, farmers, and families.
Parliament put in place a similar measure more than 40 years ago. It was good government policy and helped to support credit union capital growth, mirroring the positive impact the capital gains tax deduction has on building bank capital, while respecting that financial co-operatives build capital differently. This measure is set to expire in 2017, and should be replaced by our proposal.
To conclude, Mr. Chair, the Canadian Credit Union Association thanks the committee for the opportunity to participate in the consultation. We look forward to your questions.