Ontario plans to make several changes to the legislation governing credit unions. RRSPs and TFSAs will no longer benefit from unlimited deposit insurance coverage, but credit unions will be allowed to own insurance brokerages as subsidiaries.
On Feb. 12, Minister of Finance Charles Sousa announced a number of proposed changes to the province's Credit Unions and Caisses Populaires Act stemming from an earlier report published by Laura Albanese, Liberal MPP for the riding of York South – Weston and parliamentary assistant to the Minister of Finance.
New coverage limit
One important change involves amounts covered by the Deposit Insurance Corporation of Ontario (DICO). While registered accounts such as RRSPs and TFSAs at credit unions currently enjoy unlimited coverage, basic deposits at credit unions are only insured for up to $100,000. The government is planning to set a coverage limit of $250,000 for each kind of account.
"I recommend that the coverage limit for basic credit union deposits be increased to $250,000. At the same time, I recommend $250,000 in coverage be provided for aggregate cash deposits in each type of registered account. In other words, total cash deposits in all RRSP accounts held at a credit union by a member (regardless of the number of contracts) would be insured to $250,000," wrote Albanese in her report. "A separate $250,000 limit would cover cash deposits held in each of the other types of registered accounts. This approach would not impact other non-cash investments held in RRSPs, as such investments are not subject to deposit insurance coverage."
Equal footing with banks
Ontario has also accepted Albanese's recommendation that credit unions be placed on an equal footing with banks and allowed to establish or invest in insurance brokerages as subsidiaries. In areas such as vehicle leasing, where credit unions already have more flexibility in ownership of subsidiaries than banks, Albanese has determined that Ontario should maintain these differences.
“Credit unions and caisses populaires provide valuable services that benefit their members, help grow the economy and create jobs," comments Sousa. "Implementing these recommendations would foster a more efficient and effective regulatory framework that better protects consumers and investors while improving the competitiveness of Ontario’s financial services sector.”