Thank you very much.
Good morning. I would like to thank the committee for this opportunity to provide the banking industry's perspective on the status of cooperatives in Canada.
For the purposes of my appearance today, I'm going to focus my remarks on financial cooperatives.
The Canadian Bankers Association represents 54 banks operating in Canada, banks that are well managed and well capitalized and that operate in a competitive market with strong, prudential oversight. A strong and healthy financial system is the cornerstone of a strong economy, and the CBA believes that credit unions are an integral part of a strong and competitive financial system.
Just to be clear, when I speak of credit unions, I'm also referring to caisses populaires, whether in Quebec or outside of Quebec.
A strong and healthy financial sector helps businesses grow and thrive and helps Canadians buy homes and save for education and retirement. Canadian consumers and businesses enjoy a wide range of affordable and accessible financial products and services, such as chequing and savings accounts, insurance, investments, commercial financing, and mortgages. Competition to provide these financial services is fierce. Not only do banks compete aggressively against each other to provide these financial products and services; they compete against a wide range of providers, including credit unions. These institutions offer products and services similar to those of banks.
For instance, when it comes to chequing and savings accounts, Canada has one of the most accessible financial systems in the world, with 99% of Canadians having an account with a financial institution. Banks alone offer more than 100 accounts packages in the marketplace. Youth, students, and seniors, as well as not-for-profit organizations can access discounted or free accounts. Indeed, 30% of Canadians pay no service fees at all for their banking, and credit unions also offer their own accounts packages to Canadians.
Canadians are well aware of the role of credit unions and of the level of competition and choice in financial services in Canada, and 92% of Canadians agree that there is good choice in financial services for consumers. In fact, credit unions account for 15% of deposits, 12% of residential mortgage originations, and 19% of lending to small and medium-sized enterprises across the country.
I would like to comment on the substantial evolution that we are observing among Canada's credit unions. In order to continue to provide a high level of competition and choice for Canadian consumers and businesses, there has been significant restructuring in the credit union movement. Credit unions, and correspondingly the credit union centrals that serve them, are amalgamating to support expansion in the marketplace and to take advantage of economies of scale.
Credit unions are increasingly moving away from the traditional one-branch or two-branch model. Across the credit union system, while the actual number of credit unions has declined, the size of the branch networks has increased. In Canada, there is one credit union that has nearly 100 branches, three that have between 50 and 75 branches, 12 with between 20 and 50 branches, and 28 that have between 10 and 20 branches. The size of some of these branch networks is comparable to that of small and medium-sized banks.
Consistent with this growth in branch networks is the growth of balance sheets. Over the past decade, the size of the average credit union's balance sheet has tripled. Not only is the average credit union growing, but the largest credit unions make up a significant share of the credit union system in some provinces. In Alberta, the two largest credit unions make up 73% of the credit union assets in the province, and the largest institution accounts for 58% of assets. In British Columbia, Saskatchewan, and Ontario, the figures are 51%, 40%, and 37% respectively for the two largest institutions.
In order to provide liquidity management, payments processing, and other support services to these growing credit unions, credit union centrals in various provinces are amalgamating as well. The credit union centrals of British Columbia and Ontario merged into Central One Credit Union in 2008, while credit union centrals in P.E.I., New Brunswick, and Nova Scotia joined together to form Atlantic Central in 2011. Discussions have taken place for additional consolidation at the central level. I would like to note that these centrals are federally regulated, even as the credit unions themselves are provincially regulated.
I would now like to turn to the federal government's initiative to permit the creation of federal credit unions.
As credit unions continue to evolve in order to provide further competition and choice in the financial marketplace across provincial boundaries, it is important that there be an appropriate supervisory and regulatory framework that supports growth while ensuring safety and soundness for individual credit unions and for the national financial system as a whole.
It is for this reason that the CBA strongly supports the federal government's efforts to establish a legal framework for credit unions to be incorporated and regulated at the federal level if they so choose.
The draft regulatory framework, which is currently the subject of ongoing consultations, subjects federal credit unions to the same prudential capital and liquidity standards and business and investment powers that banks are subject to. At the same time, it provides an opportunity for credit unions to broaden choices for consumers by improving services to existing members and by attracting new members across provincial borders.
While provincial credit unions can incorporate a banking subsidiary or establish a retail association, these options are cumbersome and do not effectively take advantage of economies of scale. The federal credit union legislation provides a more straightforward, simple, and seamless vehicle to operate across provincial borders. It is the view of the CBA that the addition of a federal option provides a tremendous amount of flexibility to the way in which credit unions operate and are supervised and regulated in Canada.
Credit unions can continue to operate under a provincial regulatory regime, but doing so means they will continue to be limited to the province of incorporation. For those credit unions that wish to grow larger by serving members in more than one province, the federal framework offers a good option.
It is important that there be no overlaps or gaps in the regulatory framework for credit unions. For instance, provincial regulators have raised some concerns about some credit unions taking advantage of gaps in provincial legislation and regulation to solicit cross-border deposits. This can ultimately lead to confusion about the nature of and responsibility over these institutions as well as about the nature of deposit guarantee. The federal framework, on the hand, provides a simple, clear, unambiguous means to reach out to members across the country.
Federal credit union legislation is an appropriate model to address the statutory and regulatory gaps. Credit unions incorporated under the federal model will benefit from oversight by the Office of the Superintendent of Financial Institutions and the Canada Deposit Insurance Corporation deposit insurance, while Canadian consumers and businesses will benefit from greater financial choice and competition.
In short, the federal credit union regime goes a long way to creating an appropriate, efficient, and effective regulatory regime for a modern credit union movement in Canada.
Thank you very much. I look forward to your questions.