What s in a gerund? The future of banking in Canada. Marc-André Pigeon. Associate Vice President, Financial Sector Policy

Transcription

1 What s in a gerund? The future of banking in Canada Marc-André Pigeon Associate Vice President, Financial Sector Policy Filene Research Institute

2

3 Domestic assets of Canadian deposit-taking institutions (2016) Other financial institutions, 1.6% Other banks 9.4% Trusts & mortgage companies, 1.4% Caisses populaires, 8.6% 72.0% 15.3% 12.9% 7.9% 14.2% 15.5% Credit Unions 7.1% 6.2% Source: OSFI, bank annual reports, provincial credit union regulators Sources : BSIF, rapports annuels des banques, organismes provinciaux de réglementation des caisses

4

5 HISTORICAL CONTEXT Bank Act s. 983 restrictions Subject to the regulations and subsections (4) to (5.1), (6) and (12), every person, other than a bank, who uses the word bank, banker or banking to indicate or describe a business in Canada or any part of a business in Canada, without being authorized to do so by this Act or any other Act of Parliament, is guilty of an offence. In other words: If you are not a bank" as defined and governed by the Bank Act you cannot use the banking terms to describe your business. Intent: To ensure consumers are not misled onto thinking they are dealing with a federally regulated bank.

6 No one can say we didn t try Manitoba Ad Campaign

7 BANKING TERMINOLOGY ISSUE Advisory Restrictions on the use of the words bank, banker and banking Issued June 30, Intent to enforce, through criminal prosecution, a prohibition of the use of bank, banking and banker by non-banks to describe their business or business activities. Prohibition extends to indirect use by advertising firms, CCUA, etc. using the terms on behalf of a credit union. Literal interpretation of Bank Act s. 983 without regard to policy intent, legislative history or popular usage. Compliance deadlines: December 31, 2017: Websites or other electronic mediums June 30, 2018: Print materials June 30, 2019: Physical signage

8 BANKING TERMINOLOGY ISSUE Impact of Advisory Advertising Signage Websites

9 BANKING TERMINOLOGY ISSUE Impact of Advisory Legal Competitive landscape Banks = bank, banking, banker Credit unions =???

10 BANKING TERMINOLOGY ISSUE Department of Finance consultation On August 11, 2017, citing concerns by provincial credit unions, the Department announces that the question will be part of statutory public consultation on the Bank Act and other acts. OSFI responds by suspending Advisory adding Once the Department of Finance has announced the outcome of its consultation on these restrictions, OSFI will communicate its revised expectations for compliance with the Advisory, as appropriate and necessary.

11 INTERNATIONAL CONTEXT Basel Committee on Banking Supervision s thoughts (circa 1996) Policy Objective In particular, at a minimum, the activity of taking a proper bank deposit from the public would typically be reserved for institutions that are licensed and subject to supervision as banks. The term bank should be clearly defined and the use of the word bank in names should be controlled to the extent possible in those circumstances where the general public might be misled by unlicensed, unsupervised institutions implying otherwise by the use of bank in their titles.

12 INTERNATIONAL CONTEXT Current practices Australia New Zealand USA Credit unions may use the expressions banker and banking in marketing and branding material to describe its activities. Non-banks can use terms in advertising but must include a statement that it is NOT a registered bank in a way that, as far as is reasonably practicable, that attracts attention. Federal: No prohibition on federal credit unions. NCUA says terms are synonymous with financial services State-level: Varies. Most ban words (e.g., Arizona, New York), others do not (e.g., Vermont, Wisconsin).

13 MARKET CONTEXT How to differentiate credit unions? BANKS OTHERS CREDIT UNIONS & CAISSES POPULAIRES

14 POLICY OUTCOME Constraints & compromise want to be able to use the words Canadians use everyday without causing confusion. Credit unions Department of Finance Some use credit union as part of brand Others don t use credit union brand Federated model = secondary non-cu brands Want to avoid having discretion reside with OSFI Get to use bank and banking to describe what we do. Credit unions have to communicate they are credit unions in a way people will understand. Policy intent: prevent consumer confusion Trend towards restricted use Fed/prov distinction International context Fintech Prominent and proximate Unique brand presence? Middle ground: Prudentially regulated deposit-taking entities to use the bank terms to describe their services provided the terms are not used in a name, trade name or mark and provided such use could not reasonably be expected to lead a member of the public to believe that they are dealing with a federal bank.

15 Advocacy impact 83 legislator meetings 134 legislator meetings 140 submissions from credit unions 12+ submissions from partners

16 ISSUE UPDATE Use of banking terms by credit unions DEVELOPMENTS Aug: Minister agrees to move the issue into federal financial framework review Aug: Regulator suspends its advisory pending review Sept: Over 140 credit union submissions to public consultation Sept: Subject of a Senate committee study CURRENT STATE Oct: Senate committee urges change to allow credit unions to continue use of the verbs. Oct: Minister tells House committee that announcement is coming to allow credit unions to use verbs. CCUA in regular contact with Minister s office. Awaiting announcement.

17 Lessons Learned? 1. Officials have their own agendas. 2. Relationships with legislators = an insurance policy against this kind of thing. 3. Try to make issues tangible.

18 4. Have fun

19