With the failures at PACE Credit Union still fresh, the Financial Services Regulatory Authority of Ontario (FSRA) is proposing a series of new rules to beef up standards for credit unions.
FSRA has proposed new business and financial practices rules, along with new capital and liquidity requirements, for the province’s credit unions and caisses populaires.
The regulator said that the rules are intended to make the supervision of the sector “more transparent and effective” while also strengthening the sector and better aligning its requirements with international standards.
The proposals come in the wake of FSRA stepping in to take control of PACE Credit Union amid concerns about governance failures and alleged misconduct by certain executives at the company.
Among other things, the proposed rule on credit unions’ business practices aims to address governance standards, management and internal audit, compliance and finance functions.
The rule is “intended to establish principles-based and outcomes-focused requirements for sound credit union governance, including operational management, enterprise risk management and oversight functions,” FSRA said in a notice setting out the proposals.
The proposed rule on capital adequacy is intended to improve risk sensitivity and resiliency by setting new requirements for calculating capital ratios and regulatory minimums.
FSRA also proposed liquidity rules that would set new requirements for diversifying funding, calculating liquidity ratios and internal liquidity assessment processes.
The proposals on capital and liquidity are intended to ensure that requirements in these areas are “clear, transparent and more closely aligned with other jurisdictions’ regulatory approach and international standards than the current requirements,” FSRA noted.
The proposals are out for comment until Sept. 14.
FSRA is hosting a technical briefing on the proposals on June 24.