Thank you, Mr. Chair, and members, for inviting me to be part of this important study of the opportunities and challenges facing the cooperative sector in Canada.
My name is Robert Marshall, and I am the president and chief executive officer of Mountain View Credit Union. As such, I will be speaking from the perspective of our credit union and, more generally, credit unions in Alberta. Please allow me to begin by spending a few moments talking about Mountain View Credit Union.
Headquartered in Olds, Alberta, Mountain View Credit Union has assets exceeding $550 million. Our 11 rural branches, soon to be 12, provide service to over 15,000 members. Mountain View takes great pride in giving back to the communities in which it operates. For the past five years, Mountain View has consistently contributed approximately 3.5% of its pre-tax income in scholarships, donations, and sponsorships. Our employees also show their commitment to their communities by volunteering a significant amount of their time to various local events and organizations. In 2011, Mountain View Credit Union staff contributed over 4,500 hours in volunteer time to everything from 4-H to minor hockey. We also very pleased to have paid our members over $15 million in profit sharing since 1988.
I would now like to take this opportunity to provide the committee with further context on the credit union system in Alberta. The Alberta credit union system is an important provider of financial services to Albertans and a key contributor to the provincial economy. Today, 34 independent credit unions operate in Alberta, with over 650,000 Albertans as members. Province-wide, credit unions have over 200 branches and employ nearly 3,500 Albertans.
During the first quarter of 2012, the Alberta credit union system’s total assets surpassed the $19-billion mark, growing by $740 million over the past year. The profitability of the Alberta credit union system remains strong, with net income of $33 million for the first quarter of 2012.
Consistent with the national trend taking place within the Canadian credit union system, several credit unions in Alberta have chosen to consolidate in order to remain competitive. This consolidation is in response to several factors, such as: changing regulatory standards; increased competition from banks, insurers, and non-conventional financial service intermediaries; and significant technological advancements in the financial services sector.
One notable example was in 2008, when three Alberta credit unions consolidated to form Servus Credit Union, one of the largest credit unions in Canada. We expect the consolidation trend to continue in Alberta as credit unions strive to remain competitive in the rapidly changing financial services marketplace.
As mentioned by the Credit Union Central of Canada when they appeared before you on July 10, the consolidation and growth of our system has implications for the traditional scope of credit unions, which has always been provincial. For instance, Servus Credit Union, which I mentioned earlier, holds almost 60% of the provincial system’s assets. Similar situations exist in other provinces. For these credit unions the greatest opportunity for growth exists outside their provincial boundaries.
On behalf of the Alberta 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 Alberta credit unions are successful financial institutions under provincial jurisdiction, we view the option of a federal charter as another means for interested credit unions to achieve further growth opportunities and enhance services to their members.
We were pleased to see that the complementary regulations required to bring the federal credit union framework into effect were recently published in the Canada Gazette.
As you heard earlier from Canadian Central, credit unions are very concerned about the extensive and unbalanced competition we experience from crown financial institutions. In Alberta, we are subject to this unbalanced competition from both federal and provincial crown institutions. This is particularity evident in the agricultural lending market in Alberta. Despite the fact that Alberta credit unions have thousands of rural members and play an integral role in many rural communities throughout the province, our market share of Alberta’s approximately $15 billion in outstanding agricultural debt is only around 5%. Meanwhile, Farm Credit Canada holds approximately 25%, and two provincial crown institutions, ATB Financial and the Agriculture Financial Services Corporation, combined hold close to 20%.
The primary cause for low credit union market share in Alberta’s agricultural lending market is the fact that crown financial institutions, such as FCC, are not subject to the same regulatory and legislative requirements as credit unions and banks. This translates into market advantages for crown financial institutions.
For example, FCC completes their own in-house appraisals and then lends up to 100% of the value of the security, which no private sector financial institutions are permitted to do. Given FCC's ability to access funds using the federal government's AAA credit rating, they are able to offer lending interest rates below what credit unions and banks can offer. In Alberta, we have heard of instances where FCC has competed with credit unions beyond the agricultural marketplace by extending favourable financing to commercial ventures that have very little involvement in agriculture.
Unbalanced competition from crown financial institutions is such a significant issue in Alberta that many credit unions are questioning whether they will play a role in the future in providing agricultural financing or services to rural communities. Accordingly, we fully support Canadian Central’s position that the government amend FCC's legislation and operating principles to bring them into closer alignment with those of the Business Development Bank of Canada and Export Development Canada. Specifically, this would mean that the legislation governing FCC would be subject to a regular parliamentary review and, second, be amended to require FCC to operate in a manner that complements rather than competes with the activities of private sector lenders.
One last point I wish to raise is with respect to the ever-growing regulatory burden on financial institutions. As noted by Canadian Central, credit unions agree that a strong regulatory framework is important in protecting the savings and security of Canadians. However, we are concerned that the regulations are being applied in the same manner to all financial institutions, whether they have 2,000 employees or only 110 employees, as is the case with Mountain View Credit Union. The result is much higher relative compliance costs for credit unions.
The government’s Red Tape Reduction Commission emphasized in its final report that a one-size-fits-all approach to regulation tends to disproportionately burden smaller businesses, such as credit unions. We agree with that conclusion and urge the government to follow through on its commitment in Budget 2011 to require regulators to examine current and future regulation through a small business lens, to ensure that new and existing rules do not adversely affect credit unions while creating unintended advantages for larger financial institutions.
Mr. Chair, on behalf of Mountain View Credit Union, I wish to thank this committee and your colleagues for undertaking this important study.
Across Canada this year, cooperatives, including credit unions, are celebrating the 2012 International Year of Cooperatives. Cooperatives have played a vital role in building our country, and we hope the insight provided in your final report will continue to promote and support cooperatives' contributions to our communities.
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.