How Ontario Credit Unions Are Regulated


Revisions to DICO By-law #5

We are pleased to confirm that the government recently approved the revised DICO By-law #5. This revised by-law becomes effective for financial years starting on or after January 1, 2012.

DIRECTOR TRAINING AND QUALIFICATIONS

ADDITIONAL CONSULTATION ON PROPOSED MODIFICATIONS TO THE DRAFT GUIDANCE NOTE: DECEMBER 31, 2011

Revised Guidance Note: Director Training and Qualification

As outlined in subsection 92(1) of the Act, a person is disqualified from being a director of a credit union if that person has not met the training requirements or qualifications for directors established by the credit union. Under subsection 125(4) of the Act, every member of an audit committee shall satisfy such training requirements or qualifications for audit committee members as are established by the credit union.

In accordance with the revised DICO By-law #5, the board of directors is required to establish the training requirements and qualifications for directors and members of the audit committee.

Following industry consultation and feedback, including comments received at the recent webinars, we are pleased to provide revised draft guidance for further comment.

The revised guidance addresses a number of issues raised (refer to table below). In summary:

  • There are now separate Guidance Notes for Class 1 and Class 2 institutions
  • The time frames for attaining minimum expected competencies have been extended to 24 months for directors; 12 months for audit committee members and 6 months for the Audit Committee Chair and Board Chair
  • Transitional arrangements have been modified
  • The new requirements now become effective for directors elected or re-elected on or after July 1, 2012
  • The competency descriptions have been modified. The detailed competency elements are included in a separate document
  • The sample board competency matrix has been removed and will be included as part of additional tools

Application Guide: Director Competencies

  • This document outlines the detailed competency elements with some modification to the terminology
  • The Class 1 version outlines the GOOD competency which combines the previous basic competency elements
  • The Expert level has been removed

Stakeholder Feedback

We wish to thank everyone who provided comments and suggestions on this challenging initiative and the draft proposals. Your views and concerns were most welcome and helpful. A summary of feedback and DICOs response is now complete. Although many of these issues were discussed at the recent webinars, the additional comments may help provide further clarification. We believe that we have captured the main concerns and suggestions raised, but welcome any further comments or questions on any of the issues outlined.

Please forward any comments or questions to Director Training at DICO by December 31, 2011.

Next Steps

After the end of the consultation period, a webinar will be arranged in mid January to discuss and respond to any further comments and questions that you may have and confirm final guidance.

We are also currently working a number of related initiatives, including director self-assessment tools, best practices and sample policies. We anticipate that these will be finalized by March 31, 2012.

Publication Highlights
Revised Guidance Note: Director Training and Qualifications
  • Class 1 Credit Unions, Draft November 2011
Revised Guidance Note: Director Training and Qualifications
  • Class 2 Credit Unions, Draft November 2011
Application Guide: Director Competencies
  • Class 1 Credit Unions, November 2011
Application Guide: Director Competencies
  • Class 2 Credit Unions, November 2011
Stakeholder Feedback
  • November 2011
 

ENTERPRISE RISK MANAGEMENT (ERM) - Class 2 Institutions (refer to table below)

As previously indicated, DICO proposes to phase-in this new requirement over the next two years although early adoption is encouraged. Institutions with more than $250 million in assets will need to address this requirement starting in 2012. All other Class 2 institutions will need to address this requirement in 2013.

Final versions of the Enterprise Risk Management (ERM) Framework, the Application Guide and the Guidance Note are now available. On Thursday, September 29, 2011 DICO hosted a webinar on this subject to review the concepts outlined in the documents, provide more clarification and address any questions from the sector.

Class 1 institutions may also wish to review these documents to see if they may be helpful.

Guidance Note: Enterprise Risk Management (ERM)

This guidance note outlines the minimum requirements for an enterprise risk management program. It also identifies the typical features of this program and provides further information on the key responsibilities for the Board, Audit Committee and management and DICO's expectations and assessment criteria.

ERM Framework and ERM Framework Application Guide

DICO has been working with an industry working group to develop additional information and tools for help in setting up an ERM program. The ERM Framework document outlines basic objectives, concepts and structure of an effective ERM program while the ERM Application Guide provides an example of an ERM methodology for consideration. The ERM methodology and process adopted by a credit union will differ between credit unions based on their size and complexity.

We would like to take this opportunity to thank the industry working group for their valuable insight and hard work in developing these documents and to the sector members who sent us their comments helping us to further refine and improve these documents.

 
Publication Highlights
Enterprise Risk Management (ERM) Framework
  • September 2011
ERM Application Guide
  • September 2011


Guidance Note:Enterprise Risk Management (ERM) for Class 2 insured institutions
  • September 2011



Ontario credit unions are regulated through a comprehensive regulatory framework which involves the Ministry of Finance , the Financial Services Commission of Ontario (FSCO)  and the Deposit Insurance Corporation of Ontario (DICO).

This regulatory framework includes:

The Ministry of Finance is responsible for developing and establishing the legislative and regulatory framework under which credit unions must operate. FSCO is responsible for ensuring that credit unions operate in accordance with the requirements of the Act and Regulations, particularly with respect to issues involving market conduct issues relating to members and the general public.

DICO is responsible for overseeing compliance with solvency rules and for providing deposit insurance protection for deposits held in Ontario credit unions up to prescribed limits. As part of this responsibility, DICO has the authority to issue by-laws to ensure that insured institutions operate in accordance with Sound Business and Financial Practices.