Five chartered newbies aim to carve out their niche

TORONTO • Ed Gettings saw the writing on the wall five years ago.

Back then, Street Capital Financial Corp., a Torontobased residential mortgage lender he co-founded, concluded that focusing on mortgages alone had both limited growth prospects and increasing risk. As a result, the company decided to apply to become a Schedule I bank, a licence that would allow it to take deposits and help branch out into other financial products.

Tough new mortgage eligibility rules unveiled by the Canadian government last fall are the latest evidence that it was a smart move.

“We were prescient, in some way,” said Gettings, chief executive of Street Capital Group Inc., parent company of both the new bank and the mortgage lender.

Street Capital Bank of Canada on Feb. 1 launched as a domestic Schedule I bank, which are allowed to take deposits that may be eligible for insurance from the Canada Deposit Insurance Corporation, also known as a chartered bank.

It is one of five new domestic banks approved by the Ministry of Finance and the Office Superintendent of Financial Institutions since the beginning of 2016. The others are Uni Financial Cooperation, Wealth One Bank of Canada Inc., Exchange Bank of Canada and Concentra Bank. They’re all trying to carve out a niche in an industry dominated by the Big Six.

Street Capital’s long-term goal is to become a “full-suite, multi-channel retail banking offer, enabled by technology,” according to its website. It has now started taking deposits, will launch an uninsured mortgage product this spring, and aims to have a credit card offering by 2018.

Uni Financial Cooperation, formerly called Caisse populaire acadienne ltée, became Canada’s first federal credit union. Now that it has been given the charter and follows the Bank Act, it has more flexibility to service its customers in other provincial jurisdictions, said its chief executive Robert Moreau.

Meanwhile, Concentra Bank’s strategy is to offer investment and lending solutions solely to Canada’s roughly 300 credit unions. Being the first Schedule I bank to offer wholesale banking to this niche “is our competitive advantage against the bigger banks,” said CEO Ken Kosolofski.

The Saskatoon-based firm launched as a chartered bank in January and it’s not looking to become a full-service bank, but wanted the licence because of the legal and brand recognition it affords.

Wealth One, on the other hand, is aiming to be the preferred bank for the Chinese Canadian community.

Finally, Exchange Bank of Canada’s vision is to be a specialty, wholesale foreign exchange bank and it has “no interest whatsoever” in getting into retail banking, such as chequing accounts or lending money, said its chief executive, Randolph Pinna.

“We absolutely do not have a vision of competing with our customers,” he said. "Our customers are those retail banks that provide full service (banking).

Being able to call itself a bank, however, has given it a recognition value from other banks that has led to more customers, Pinna added.