Response to Comments Received from 2014 DICO Stakeholder Survey

Transcription

1 to Comments Received from 2014 DICO Stakeholder Survey Comments Guidance and Information Materials Question 1: Overall, how effective do you think DICO s guidance and informative materials are? Survey Rating: 4.24 (out of 5) 27 Received 3 N/A In my business life I find that s are most effective when they communicate an action up front. For example, ACTION: complete this survey by Feb 24 or ACTION: none. FYI only nor 0% 8% 4% 44% 44% Thank you for this excellent suggestion. An ACTION heading has been added to each DICO broadcast . DICO s information documents are always pertinent and timely Thank you. No necessary Prudential Oversight Question 2: How effective do you think DICO is in monitoring and overseeing the credit union/caisse populaire sector in Ontario? Survey Rating: 4.26 (out of 5) 26 Received 4 N/A Unskilled Directors remain a core issue in the sector and DICO must do more on that front. It has set new competency standards which is good, but what about enforcement? The regulator has to be the balance against members electing unskilled people. nor 4% 4% 0% 46% 46% DICO s role is to establish standards and guidance with respect to director training and qualifications. It is the board s role to enforce the credit union s policy in this area. Section 92 (1)(13) of the Act, sets out that individuals who have not met the training requirements or qualifications for directors established by the credit union are disqualified from being directors. In the event a director has not met the requirements, DICO expects the director to make every effort to achieve competency levels within established timeframes. Where the director is unable or unwilling, the credit union s board should take appropriate action after providing a reasonable amount of time for the director to meet the training and qualification requirements. During the course of an examination, the adequacy of director competency levels will be assessed within the context of the credit union s size and complexity and its risk profile. Where the credit union has identified a director who does not meet its training and qualification requirements and the requirements set out in DICO s Guidance Note on director training and qualifications, the institution may be found in noncompliance with By-law No. 5. What is DICO s policy? Not as effective as we would like them to be. There are red flags out there. Prudential risk at institutions is rigorously monitored through reporting and examinations and responded to in a timely manner when identified. In spite of these efforts, at times an institution may become involved with an activity or have a situation where the prudential risk is either not identified by the credit union or has not been reported to DICO. In these cases, an appropriate risk management strategy is initiated and efforts made to work with the credit union to effectively address it. Should credit unions become aware of situations that raise red flags in other institutions we would be pleased to receive that information and follow up on it. Page 1

2 Question 2 (continued): How effective do you think DICO is in monitoring and overseeing the credit union/caisse populaire sector in Ontario? We experienced issues with the OSV Examination where they were referring to incorrect External Auditors and incorrect member accounts. We were advised that this was due to new auditors on site and it was corrected after several conversations with DICO. In this particular instance, the examination report template used contained incorrect information that had not been erased. However, it did not contain any sensitive data. After this error was pointed out by the institution, amendments were made to the report and an additional quality control element was added to the examination report process. I think DICO has good control and gives a pretty big responsibility to its caisses to take action when concerns are raised. Overall Impressions Question 3: What is your overall level of satisfaction with DICO in processing regulatory applications? Survey Rating: Received 9 N/A We have not been exposed to any of these issues. We haven t applied for any so we would not know. The regulatory applications are processed according to the request and the responses are usually favourable. nor 5% 0% 0% 38% 57% Question 4: How satisfied are you with DICO as the principal prudential regulator of Ontario s Credit Union and Caisse Populaire sector? Survey Rating: Received 6 N/A Not acting quickly enough when problems arise. nor 4% 0% 0% 46% 50% We recognize from the perspective of some institutions, it may appear that DICO s should act faster when problems are discovered. However, like all other regulators, DICO must act in accordance with the law, ensuring procedural fairness. We are required to provide each institution with the opportunity to implement corrective strategies prior to taking regulatory action. While this process ensures insured institutions are treated fairly it can be protracted. In some cases, where it is obvious that there is a serious problem, we have taken and will continue to take immediate action to protect depositors. It appears that DICO may need more powers to address problems in Ontario credit unions. I refer to a local credit union that has governance and management issues. The legislation that governs the sector and DICO tries to strike a careful balance between the powers of the regulator and the rights of institutions. The government is likely to be reviewing the Act and regulations later in 2014 and this will be an opportunity to review the issue of appropriate powers of DICO as well as the safeguards for institutions. Page 2

3 Question 4 (continued): How satisfied are you with DICO as the principal prudential regulatory of Ontario s Credit Union and Caisse Populaire sector? DICO s main thrust seems to be to limit risk to the insurance fund. One of the key elements of DICO s mandate is to protect the interests That drives everything from director training to encouraging of depositors and members. We do this in many ways, including consolidation in the sector. The fear among CU boards (and maintaining a reserve fund in the event of a problem situation. This members) is that the notion of supporting the idea of cooperative fund exists to enhance confidence in Ontario credit unions and caisses financial institutions is no longer in vogue. In other words, DICO is populaires. DICO also sets out requirements and expectations for no longer an advocate for CU s; it s just a risk management tool of credit unions regarding corporate governance and risk management the Ministry of Finance. practices to ensure institutions adopt prudent risk taking behaviours. Our governing legislation does not and has never contemplated DICO s role as advocate for the sector but rather an organization that enables the sector to remain competitive by protecting its depositors. Very Expensive. It is always good to have in place an organization that prudently exercises its regulatory powers in dealing with the caisses DICO is cognizant of the cost of regulation and deposit insurance and the impact of deposit insurance premiums on insured institutions profitability. Robust expense control measures are in place and, as reported in our annual reports, DICO consistently comes in under budget.. Question 5: How would you rate DICO s performance in terms of contributing to public confidence in the sector? Survey Rating: Received 7 N/A I think DICO should advertise and promote the fact that they are the deposit insurer for the credit unions in Ontario. That message coming from the insurer has a far greater impact than the CU s having a sign posted in our branches or a message on our website. nor 4% 0% 9% 17% 70% Deposit insurance coverage information is available to depositors via information brochures and other appropriate materials and enhanced by detailed consumer information on our website. We also field about 500 calls a year from the public regarding deposit insurance coverage. Is DICO really known to the public? Controls public perception. Lots of advertising within credit union branches and availability of complaint s officer at DICO. With respect to a complaint s officer, DICO has maintained the office of Ombudsman since The Ombudsman investigates complaints and recommends solutions relating to regulatory issues between insured institutions and DICO or to disputes between depositors or borrowers related to credit unions that are being liquidated and cannot be resolved at the operational level. Members complaints toward a credit union are handled by the Financial Services Commission of Ontario. More information on the role of the Ombudsman is available on our website. Looking Forward Question 6: Project Symphony - How effective do you think this initiative has been and will continue to be in raising awareness of leaders at Credit Unions and Caisses populaires to understand evolving issues surrounding sustainability and developing a strategic plan for the sector? Survey Rating: Received 8 N/A Reducing the number of credit unions appears to be the tune of Project Symphony no matter the effectiveness of the credit union to deliver financial services to its members DICO raised the awareness but not enough to develop a strategic plan for the sector The reports are showing DICO is proactive. We can only hope that those credit unions with governance and capital issues are getting the message. nor 0% 9% 9% 27% 55% The purpose of Project Symphony was to identify common challenges in terms of long term viability faced by the sector and to provide strategic options to position caisses, credit unions, leagues and other sector partners for future success. DICO was pleased to play a role as facilitator for these discussions. Credit unions and caisses populaires are encouraged to engage in and continue the dialogue and develop appropriate strategic plans for their institution. In particular, Boards of Directors of institutions experiencing long term viability challenges should ensure strategies developed are in the best interest of their members. Page 3

4 Question 6: Project Symphony - How effective do you think this initiative has been and will continue to be in raising awareness of leaders at Credit Unions and Caisses populaires to understand evolving issues surrounding sustainability and developing a strategic plan for the sector? Great reports. All of us rely on trends in doing out budgeting and marketing. These reports paint a very clear picture of past activity. The message is clear; grow or disappear. The report was great and it had a huge impact. We need the regulator out there now talking truth to point out to CU s that they must get to it. More forcefulness is needed. As a Director of the board of directors I was well aware of the issues and challenges in the sector. Our CEO was on the committee so our credit union was aware of the study Project Symphony was very revealing. It is very important for our industry to concentrate on potential solutions (consolidation) to address deficiencies and protect the interests of our members. The Desjardins approach through the Federation des caisses populaires in Ontario is certainly recommended. Question 7: In your view, how important is DICO s involvement in these types of initiatives? Survey Rating: Received 6 N/A I think many credit union boards would be happy to pay DICO or their recommended person(s) to give oversight annually or prior to an audit just like any other consultant and the whole system would be stronger for it, especially in the area of governance. I believe that much could be gained and the idea that we are all in this together is a fact. I think somewhat important but it looks to me like they are abusing their involvement to further their own agenda; reduce the number of credit unions so they have less work. Unimportant Unimportant Important nor Unimportant Important 5- Very Important 0% 0% 0% 21% 79% DICO s regional managers or senior management are available to provide suggestions and comments when requested and many institutions have taken advantage of this to discuss future plans and new products. Recent enhancements to the examination process have increased the focus on corporate governance. DICO s role in Project Symphony was to act as facilitator. DICO has never promoted consolidation and does not have an agenda to achieve this. Instead, DICO has consistently encouraged stakeholders to explore all options for future success that are in the best interest of the credit union s members. One of the options typically explored by boards of credit unions is the benefits to their members of partnering with another credit union 100% critical. DICO s general overview of the issues allows it to clearly identify potential problems and appropriate solutions. DICO is well positioned to understand the challenges, issues and provide potential solutions for the future. You have to be involved. Very important that DICO had the independent study to back up what they and a lot of progressive credit unions have been saying for years. Page 4

5 Question 8: In the context of this and other initiatives taken by DICO, how would you rate DICO with respect to how proactive it is in dealing with emerging issues pertaining to the sector? 22 Received nor Survey Rating: N/A 5% 0% 9% 36% 50% DICO is not proactive enough Please see response to first comment under Question 4 There are concerns in the system that you have limitations in dealing with problems and when speaking with problem credit unions they state that DICO has too much power. DICO should continue to act prudently when dealing with our member s money and the sector. I think DICO has tried to be proactive but the level of expertise is still not there at many individual credit unions. Please see response to first comment under Question 2. It hits all the right themes, but it needs to take action-i.e. remove all directors that are not skilled. That would send a huge message The caisses and credit unions form an umbrella under which these organizations operate. DICO has expertise across the sector and can provide valuable feedback and be proactive. Question 9: What risk areas or initiatives do you believe should be priorities for DICO in the next 1-3 years? DICO should concentrate on helping credit unions meet their compliance requirements through requiring extensive plans including director involvement, management accountability and heightened awareness of governance requirements. DICO s examination process is aligned with By-law 5, and the three standards of governance (Board, Audit Committee, Management). As a follow up after every on-site examination, DICO requires the credit union to develop and submit an action plan to cure any deficiencies noted or best practices recommended. DICO reviews the plan in discussion with the credit union, and monitors the plan until fully implemented. The board of directors is directly involved in the process as it must also present a formal attestation to DICO that the board is satisfied the plan has been fully and effectively implemented. This ensures full transparency of the process and full engagement of the board. We need support from DICO in getting the deposit insurance raised from $100,000 to at least 250K or more Priority Initiatives for DICO: (1) Establish mechanisms to recognize the strength and legitimacy of the group capital of caisses Desjardins (2) Establish mechanisms to efficiently streamline the numbers of caisses and particularly credit unions to create economies of scale, profitability and financial stability. Financial risk assessment has been well managed by DICO for many years. We need to have workshops and training specifically at the director level in governance DICO s role is to act in an advisory capacity to the Ministry of Finance on issues of this nature. Interested stakeholders are encouraged to ensure their views are heard during the upcoming legislative review once the Ministry initiates the process in the late fall. DICO encourages directors to attend workshops and training available through third parties or other alternative training options, and to take advantage of the various complimentary webinars DICO offers throughout the year. Move more aggressively with faltering organizations Please see response to first comment under Question 4 Continue to push consolidation and skill development More consolidation; DICO could facilitate; Make it easier for larger CU s DICO has never promoted consolidation. DICO has consistently encouraged all stakeholders to engage in dialogue on all significant sector issues in order to develop strategies and initiatives to position caisses, credit unions, leagues and other sector partners for future success. Typically, one of the options explored during this discussion is the benefits to members from partnering with another credit union. Page 5

6 Question 9 (continued): What risk areas or initiatives do you believe should be priorities for DICO in the next 1-3 years? Ensure smaller credit unions remain sustainable Credit Unions available to those wishing to own their own financial institution no matter how small their community Attention to the small caisses Over regulation of small credit unions Capitalization of caisses and credit unions Low margins Question 10: Any other comments or suggestions for DICO? Thank you! It is logical for DICO to have full regulatory powers Insured institutions are encouraged to ensure their views are heard on this and other issues during the upcoming legislative review once the Ministry initiates the process in the late fall. Insurance costs are too high Insurance premiums are designed to cover three elements. The first is the cost of DICO s operations and the second element is to cover expected losses during the year. The third and largest portion of the premium collected is used to build and maintain the deposit insurance reserve fund. Ontario s deposit insurance reserve fund is one of the lowest in terms of percentage of insured deposits and absolute dollars when compared to other larger provincial jurisdictions. DICO s Board determined recently that a reserve fund target of 100 basis points of insured deposits should be sufficient to provide adequate protection for depositors. DICO is very cognizant of the impact of deposit insurance premiums on profitability of insured institutions. Once the reserve fund target is reached, a reduction in premiums can be considered. In the meantime, rigorous expenses controls are in place. Generally a good job, not impressed by internal inspectors but probably efficient for DICO?. DICO Management is approachable and should accommodate credit union issues as they arise. Our CEO has had both good and not so good experiences recently but asked that I communicate that we are pleased overall and appreciate DICO s support. Continue the good work and always remain attentive to the important needs of credit unions and caisses, remain strong and confident for our members, and to remain competitive and take our place as Ontario financial institutions of choice Very satisfied with DICO and their efforts to keep our insurance premiums stable You are always who we look to for info and templates for meeting regulatory requirements. I think that implies something DICO is doing a very good job and is clearly well run itself Great work Andy! Thanks Page 6