Thank you, Mr. Chair and members, for inviting Vancity to be part of this important study into the opportunities and challenges facing the cooperative sector in Canada.
My name is Rob Malli, and I am the chief financial officer and current acting CEO of Vancity, based in Vancouver, British Columbia. Today I will be speaking from the perspective of credit unions at the national and provincial levels as well as Vancity. Please allow me to begin by spending a few moments talking about credit unions in general.
It is clear that your constituents find value in cooperatives through the growth that has been achieved throughout Canada. With membership currently at 5.2 million, and membership growth surpassing population growth, assets in financial cooperatives reached $140 billion by the end of 2011. This is roughly the same size as that of the National Bank of Canada, the sixth-largest bank in Canada.
We see this as positive from a market competition standpoint and in terms of being a significant contributor to the current health of our financial services industry. This is an important distinction in the cooperative operating model. We grow to support the communities and members we serve, which in turn sustains the long-term viability of the credit union.
Since 1946 Vancity has known that members make us who we are. This started with the provision of banking services to those in the community who weren't served by existing financial institutions. As a cooperative, Vancity is driven by the needs of its members, which has resulted in the provision of many firsts in its early beginnings, including being the first in Vancouver to write mortgages east of Main Street, at the time a working-class community that wasn't considered a desirable place to lend, and being the first financial institution in Canada to underwrite mortgages to women without a male co-signer.
This ability to work with the needs of the community serves us well today, and has allowed Vancity to be an innovator in providing real-time solutions to community issues in such areas as affordable housing, local food systems, social enterprises, energy and the environment, and financial literacy, just to name a few.
One recent example is a real estate development in downtown Vancouver. In 2010 we took over this real estate development as collateral when the developer went bust. We worked with a local partner to create 60 West Cordova, an innovative development that is a prototype for affordable home ownership in Vancouver. It was geared towards those who had modest incomes but were restricted by Vancouver's housing prices. With prices up to $150,000 less than nearby properties, we took a different approach to design, development, and financing, and used specialized mortgage solutions and preferred rates to increase affordability while still adhering to sound risk management principles.
By keeping our focus local, we invest our capital in the same locality where we earn it. This concept resonates well for our membership, and has made the Vancity brand very appealing. Our focus on making impact in the community has attracted a lot of members. Roughly one in six people in our market choose to do business with us. Of note, the majority of them would be welcomed by traditional financial institutions. They choose Vancity as a banking alternative not only because of our products and services, many of which would be termed mainstream, but also because of our innovative model and connection to the places where they live and work.
With this support over the last six and a half decades, Vancity has grown to become Canada's largest credit union, with assets of $16.1 billion, and 59 branch locations serving over 479,500 members and employing about 2,500 people.
But at Vancity, these members are not just the people we serve. These members are the people at the helm who guide us on our journey by electing members to sit on our board of directors or by becoming directors themselves. This democratic approach has been successful in driving Vancity's focus in providing our members with an opportunity to voice their concerns and have a say in the running and focus of the credit union, which is unique in the banking sector and exclusive to cooperatives.
Ultimately, Vancity believes that banking with the community in mind doesn't mean giving up product quality or value. We maintain our commitment to financial sustainability, social inclusiveness, and environmental responsibility while holding ourselves accountable to the member owners and ethical commitments.
On behalf of the British Columbia credit union system, I would like to thank the Government of Canada for introducing as part of the budget in 2010 a federal credit union option. While B.C. credit unions are successful financial institutions under provincial jurisdiction, we view the federal charter option as another means for interested credit unions to achieve their business objectives and enhance member services.
We are also pleased to see that the draft complementary regulations required to bring the federal credit union framework into effect were recently published in the Canada Gazette. However, the move to build upon our past success must also be measured against what we are required to surrender. Historically our strength has been the ability to take the credit union charter and leverage it to build communities and support local needs in both good times and periods of stress.
We share the government's concern about the conversion of equity to shareholders, which could be of short-term benefit to specific stakeholders, such as directors and management, and could water down the democratic processes that have made credit unions so successful in the past. We want to preserve this relationship with the community as a stakeholder, not as a single shareholder, to keep the Canadian financial institutional landscape strong.
One example of a somewhat different approach is the divisible versus indivisible capital structure seen in other countries, such as France and Italy. In this structure, capital is restricted and cannot be accessed by members or investors if it is privatized at a certain point in time. In essence, the concept of indivisible capital helps maintain a good capital base in times of systemic stress and/or credit losses, and it supports good governance that extends beyond the current membership and/or management.
In 2011 the United Nations recognized 2012 as the International Year of Cooperatives. To celebrate this distinction, Desjardins, Saint Mary's University, and the International Co-operative Alliance are hosting the 2012 International Summit of Cooperatives, in Quebec City, in October. Vancity is a sponsor. This event celebrates the success of cooperatives worldwide and promotes the development of sustainable solutions, including the potential for community-based cooperatives to deliver social services with better outcomes.
As an organization, we have learned from the impressive accomplishments of the Emilia Romagna region of northern Italy, where cooperatives account for one-third of the GDP. For the past ten years we've been participating in the cooperative studies program at the University of Bologna to learn about the potential the cooperative model offers and to enable staff to incorporate the cooperative values and principles into our strategies and everyday work.
The same fundamental elements can be found in our relationship with the Global Alliance for Banking on Values. In 2011 Vancity joined the Global Alliance for Banking on Values, a membership organization made up of 19 of the world's leading sustainable banks, from Asia and Latin America to the United States and Europe. These banks are bound by a shared commitment to finding global solutions to international problems and to promoting a positive viable alternative to the current financial system. These organizations believe that we must improve the quality of life for everyone on the planet, recognizing that we are economically interdependent and are responsible to current and future generations. We are proud to mention that two other Canadian credit unions have since joined: Affinity Credit Union, from Saskatchewan, and Assiniboine Credit Union, in Winnipeg. Together these organizations will work towards building momentum around sustainable banking, as it is our view that it has consistently delivered products, services, and social, environmental, and financial returns to support local economies.
Like credit unions, sustainable banks have played a positive role in supporting small and growing businesses over the long term, which has proven to be quite comparable to the financial returns of traditional banking models. The idea that you don't have to choose between your financial well-being and the health of your community is at the heart of our sustainable banking model. It is our hope and desire that the federal government recognizes the significance of this values-based business model and supports the movement as it becomes more widespread in the Canadian landscape.
Vancity has had the unique opportunity of working within a provincial regulatory environment, influenced by our favourable experience working with OSFI through our wholly owned subsidiary, Citizens Bank, which is a federal schedule I bank under the Bank Act, which we've had since 1997.
Although not required to do so, we have adopted additional risk management standards that go beyond provincial requirements in many areas, including in capital and liquidity management, as that complements our view on long-term sustainability in the best interests of our members.
What we do recognize is the inability or difficulty of remaining unique using a compliance-based regulatory approach to supervisory oversight. It is our desire to see government tailor their oversight programs to support and encourage our uniqueness, while adhering to a sound regulatory and risk-management framework. Recognition needs to be given to the fact that we are different. An appropriate OSFI-like framework needs to be created to preserve our capacity to deliver on community impact; we should not be forced into a regulatory landscape tailored to the banking industry. With this in mind, we believe that Vancity is a positive example of our ability to leverage the best of both worlds into a successful operating model: impact-based lending focused on community and the environment, driven by long-term viability.
Our relationship with the Kettle Friendship Society is an example of this in action. For decades, the Kettle Friendship Society has supported people with mental health issues with a drop-in centre; outreach and advocacy services; an on-site health clinic; and recreational, life skills, housing, and employment programs. When the society outgrew its rented facilities, it approached Vancity about purchasing a property of its own. Using a creative mix of first-mortgage financing and subordinated debt, Vancity helped the society purchase a 5,100-square-foot property. As a result, the Kettle Friendship Society has built its asset base for long-term sustainability and its peace of mind.
In conclusion, Mr. Chair, on behalf of Vancity I wish to thank this committee and your colleagues for undertaking this important study. Canadian cooperatives, including credit unions, are celebrating the 2012 International Year of Cooperatives. This reaffirms the fact that they play a vital role in building our country.
We hope that the insights provided in your final report will continue to promote and support cooperative contributions to our communities and ensure that our operating model is preserved for the enjoyment of future generations.
When you are in Vancouver, I encourage you to come by and let us show you the direct impact our activities are making in the community.
I thank you very much for the opportunity to present to you today, and I would be pleased to respond to any questions you may have.