Credit unions can keep on banking
Ottawa to review regulator’s decision over use of the word ‘bank’
WATERLOO REGION — Claiming a victory for common sense, credit union executives are applauding the federal government’s decision to review whether they can use terms like “banking” to describe their services.
“We’re just thrilled,” said Kate Neff, vice-president, marketing services and corporate communication, for Kitchenerbased Your Neighbourhood Credit Union. “They heard it, they heard what we are saying.”
Earlier this year, a federal regulator ruled that credit unions and other “nonbank financial service providers” can’t use words including “bank,” “banker” and “banking.” The Office of the Superintendent of Financial Institutions (OSFI) said the ruling was intended to provide clarity in the face of increased use of the terms by nonbanks.
Credit union representatives reacted in shocked surprise, arguing that the terms are commonly-used ways to describe what they do, not a means to pass themselves off as something they’re not. Credit unions, which are member-owned co-operatives, go out of their way to differentiate themselves as alternatives to banks, officials said.
Now, the federal government has said it will seek input on the issue until Sept. 29 as part of a broader review of the financial sector. In the meantime, OSFI has suspended its prohibition on the use of the terms pending the outcome of the review.
“The (Finance) Department is seeking views on whether prudentially regulated nonbank deposit-taking institutions should be given flexibility to use the terms “bank” or “banking” to describe their activities and services in appropriate circumstances,” a government report reads. “Feedback is welcomed on how to refine the limitations on the use of these terms and on how to avoid marketplace confusion and ensure appropriate protection of consumers.”
Credit unions in Canada are, for the most part, regulated provincially. The institutions had been bracing for the expensive and time-consuming task of removing all banking references from websites by the end of the year, and from printed materials and signs by mid-2018 and mid-2019, respectively.
“Basically, the conversation is continuing without this prohibition hanging over our heads,” Neff said.
A social media campaign decrying the initial OSFI ruling took off; credit union officials said clients and supporters helped to influence the government decision to take another look.
“It’s a great example of people standing up and demanding a common-sense approach,” said Tania Goodine, executive vice-president, engagement, for Londonbased Libro Credit Union, which has branches in Kitchener and Waterloo. “No credit union in Canada wants to be a bank, and yet we want to use the verb.”