Finance Minister Bill MorneauAdrian Wyld/The Canadian Press
Canada's Finance Minister plans to take a closer look at a decision by the country's banking regulator to crack down on the use of terms such as "banking" and "banker" among non-bank financial institutions.
The Office of the Superintendent of Financial Institutions (OSFI) released an advisory promising stricter enforcement against the misuse of such terms late last month. The notice was the culmination of a year or more of behind-the-scenes talks that have exasperated smaller financial institutions, such as credit unions.
Last Friday, the Canadian Credit Union Association – a trade group that lobbies on behalf of provincially regulated credit unions – met with federal Finance Minister Bill Morneau to plead its case. The CCUA argues a strict ban on the banking verbiage will cost its members up to $80-million over two years as they scrub the terms from websites and signage, and make the sector less competitive with consumers.
A clamp down on the use of those terms could also have wide ranging implications for new startups and "fintechs" – the growing array of firms using technology to try to disrupt and improve the delivery of financial services. The term "banking" can be a familiar shorthand for day-to-day business in financial services. But it also imparts a sense of stability and reliability, which is why its use is restricted by law.
By the CCUA's account, the meeting with Mr. Morneau was a win. In an internal memo to members, the association said it has "very good news" after a "productive and positive" meeting with the minister, but declined to reveal the details. "We can expect a public announcement from the Minister within the next two weeks," wrote Martha Durdin, the CCUA's president and chief executive officer, while cautioning that "there is still more to be done."
In an e-mail to The Globe and Mail, Ms. Durdin said, "We had a very positive meeting with Minister Morneau and are looking forward to a common sense resolution." In an earlier interview, she cast the dispute as "a clash of regulation versus common sense."
Mr. Morneau's press secretary, Chloé Luciani-Girouard, confirmed the meeting, also calling it "productive" and a step toward better understanding the potential impact on credit unions. "We will continue to listen, and plan to look at the issue more closely in our upcoming financial sector review consultation," she said.
The federal Department of Finance has kicked off consultations for a review of the Bank Act to be finished by 2019, and is expected to issue a white paper signalling the scope of the review in the near future.
As it stands, the Bank Act decrees that "every person, other than a bank, who uses the word 'bank,' 'banker' or 'banking'" to describe business in Canada without authorization under the Act or from Parliament "is guilty of an offence." Penalties for breaking the rules can range from fines to criminal charges against officers and directors.
Credit unions, which try to differentiate themselves from banks but have still used terms such as "banking" on websites and signs for years, first petitioned OSFI superintendent Jeremy Rudin in a February letter, then met with the regulator in May. The CCUA also encouraged members to write letters to members of Parliament, urging them to intervene with Mr. Morneau.
In a June interview, Ms. Durdin said: "It's hard to imagine how else we would describe the act of doing your everyday banking with our organizations."
But OSFI forged ahead, in spite of the association's concerns, electing to roll out a stricter enforcement regime in three stages over the next two years. The last signs using banking terms would need to be replaced by the end of June, 2019.
"OSFI and the Department of Finance work together on any number of issues," an OSFI spokesperson said Monday, "and if the Department of Finance were to alter government policy in this area by amending the Bank Act, OSFI would review its approach accordingly."
James Bradshaw