VANCOUVER, BC (October 30, 2019) – Central 1 Credit Union (Central 1) today announced that it is undertaking a review of its operations to ensure it is best positioned to enable the long-term success of the credit union system in British Columbia (BC) and Ontario.
As part of this review, Central 1 is in active discussions with the Financial Institutions Commission of BC (FICOM) and the Financial Services Regulatory Authority of Ontario (FSRA) to legally segregate the BC and Ontario Mandatory Liquidity Pools (MLPs). The purpose of legal segregation is to strengthen protection of the assets purchased with the deposits managed by Central 1 on behalf of its members. Central 1 is committed to addressing regulatory concerns that the MLP assets be free from the claims by any entity other than the credit unions making the deposits.
The MLP is a liquidity reserve fund made up of BC and Ontario credit union deposits, as required by the BC Financial Institutions Act or by contract, which are invested by Central 1 to provide liquidity for the credit unions that are members of Central 1. The BC MLP represents approximately $4.3 billion, while the Ontario MLP represents approximately $3.7 billion.
Central 1, FICOM, FSRA and the credit unions of BC and Ontario have the shared objective of maintaining the highest level of stability and resiliency within the credit union system, and the MLP is one of the tools that helps ensure that.
Central 1’s Board of Directors supports segregation of the MLPs in a manner that balances the interests of all stakeholders, does not cause undue harm to Central 1 or the credit union system, and receives member approval.
While Central 1 will continue to maintain robust capital and liquidity positions, legal segregation of the MLPs would mean these deposits would no longer be reported within Central 1’s balance sheet. Central 1 recognizes the importance of existing creditors, and is working to minimize, to the extent possible, any adverse impacts from segregation.
The final plan to legally segregate the MLPs is expected to result in legal segregation occurring no later than December 31, 2020.
- Central 1 manages the MLP as a separate business line with specific capital and liquidity requirements.
- As of June 30, 2019, Central 1 had approximately $17.9 billion of assets, of which the MLP for BC credit unions represents approximately 24% and the Ontario MLP represents approximately 21% of Central 1’s assets.
- The BC MLP is a liquidity reserve fund made up of 8% of BC credit union deposits.
- The Ontario MLP is a liquidity reserve fund made up of 6% of Ontario credit union assets for the credit unions who are members of Central 1.
- Under Central 1’s current structure, Central 1 uses the mandatory deposits made by its Credit Union members to purchase assets that form the MLPs.
- The segregation of the BC and Ontario MLP, if implemented, would not affect Wholesale Financial Services (WFS) deposits, as WFS is operated as a separate business.
About Central 1
Central 1 is a preferred partner for financial, digital banking and payment products and services – fueling the success of businesses across Canada. With $17.9 billion in assets, we leverage our scale, strength and expertise to power progress for more than 250 credit unions and other financial institutions, enhancing the financial wellbeing of more than 5 million customers from coast to coast. Central 1 is owned by approximately 150 credit unions in British Columbia and Ontario. For more information, visit www.central1.com.
Caution Regarding Forward Looking Statements
This news release contains forward-looking statements based on assumptions, uncertainties and management’s best estimates of future events. These include, without limitation, statements containing the words “may,” “will,” “intends” and “anticipates” and other similar words and expressions, including references to the segregation of the MLP. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made. Actual results may differ materially from those currently anticipated. Securityholders are cautioned that such forward-looking statements involve risks and uncertainties. Certain important assumptions by Central 1 in making forward-looking statements include, but are not limited to, Central 1 agreeing with FICOM and FSRA on a new financial structure that is acceptable to Central 1, FICOM and FSRA. Important risk factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include risks detailed from time to time in Central 1’s periodic reports filed with securities regulators. Given these risks, the reader is cautioned not to place undue reliance on forward-looking statements. Central 1 undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable laws.
Chief Investment Officer
905-282-8588 or 1 800.661.6813 ext. 8588