Phase 1 (Initial Readiness Assessment) Requirements for Credit Unions

Thank you for your interest in the streamlined approvals framework for targeted new entrants. All interested entities are required to provide us with a written submission that must include the following Initial Readiness Assessment information requirements.

Once we receive the requested information, we will schedule an initial meeting to review. This is an opportunity to provide us with greater details on your business model and enable us to review governance, ownership structure, financial resilience and overall readiness.

General expectations

All applicants should:

  • provide a self-assessment of readiness and eligibility (see Screening Criteria for Eligibility in the Streamlined Approvals Framework) before engaging with The Office of the Superintendent of Financial Institutions (OSFI).
  • be prepared to proceed under a risk-based supervisory approach, including acceptance of the potential use of conditions, restrictions, or other mitigants at entry, as appropriate.

Ownership and Financial Strength

The applicant is expected to provide:

  1. the name of the jurisdiction and date of incorporation or establishment of the applicant;
  2. the current organization chart (with percentages owned) of the applicant, showing entities in which the applicant has a substantial investmentFootnote 1 (indicate by an asterisk whether any of the entities shown on the chart operate in Canada, and provide a summary of these operations);
  3. for each entity in which the applicant has a substantial investment, a detailed description of its business activities, and:
    1. if the applicant is of the view that the entity is a "regulated entity"Footnote 2, an analysis in support of the applicant's view, and
    2. where the entity is not a "regulated entity", a detailed analysis setting out why each of its business activities are authorizedFootnote 3 and not restrictedFootnote 4;
  4. the names of all persons who have a significant interestFootnote 5 in the membership shares, any class of shares or ownership interests in the applicant and the percentage of membership shares, shares or ownership interests held;
  5. the name of each person who may exercise, directly and through any entities controlled by that person, voting rights that exceed 10% of the aggregate of voting rights that may be exercised by members and shareholders, and the percentage of voting rights that may be exercised;
  6. a description of the applicant's ownership structure, including details regarding the distribution of membership shares and shares, any proposed changes to the structure and sources of capital for initial and on-going financial support;
  7. summary of the current financial services and other key non-financial activities carried on by the applicant and its subsidiaries, including:
    1. those proposed to be provided by subsidiaries to the proposed Federal Credit Union (FCU),
    2. those proposed to be provided by the proposed FCU to subsidiaries of the applicant,
    3. a list of jurisdictions in which they operate, and
    4. the nature and degree of regulatory oversight applicable to the financial services activities;
  8. the audited consolidated financial statements of the applicant for the last three years (balance sheet, income statement, statement of changes in members' and shareholders' equity);
  9. a copy of the most recent report on the applicant issued by a recognized credit rating agency, if available; and
  10. details of whether the applicant (and any of its affiliates that are not also applicants) has been:
    1. denied a request to establish a financial institution or a branch in any jurisdiction; and
    2. the subject of any criminal proceedings or administrative sanctions.

Business Plan

The applicant is expected to provide a five‑year business plan that includes:

  1. the reasons why the applicant is seeking to continue as an FCU;
  2. a description of any transitional relief that would be requested;
  3. an analysis of target markets, opportunities and competitors, showing challenges, and plans to address them;
  4. the reasons why the applicant believes that it will be successful as an FCU, and the overall strategy for achieving this success, including a discussion of key assumptions;
  5. a detailed description of each line of business to be conducted by the applicant as an FCU and the products and services to be offered, including how the lines of business interrelate and how any new lines of business will be integrated with the applicant's current business;
  6. the risk-based capital and leverage ratios for each year of the five-year business plan, including a breakdown of all elements used to calculate those ratios and an analysis of the proposed capital instruments and any non-qualifying instruments subject to phase-out under OSFI's Capital Adequacy Requirements (CAR) Guideline;
  7. five-year pro forma financial statements (base caseFootnote 6) for the applicant as an FCU, including balance sheet, income statement, details regarding key assumptions and an identification of major asset, liability, income and expense categories;
  8. details regarding the current and proposed organizational structure including senior management reporting lines and key responsibilities within the organization;
  9. the current and proposed composition of the board of directors and senior management, and details regarding these persons;
  10. an assessment of the applicant's categorization under the Small and Medium-Sized Deposit-Taking Institutions (SMSBs) Capital and Liquidity Requirements;
  11. a summary of the applicant's current internal targets for capital and liquidity;
  12. an initial exit strategy, including an outline of the steps that the applicant proposes to take to exit from the federal regulatory system in the event it is unable to execute its business plan;
  13. a description of the work performed to date (or anticipated) in preparation for a federal continuance, including but not limited to:
    1. how the applicant will meet federal legislative requirements and OSFI's regulatory expectations. Where available, please provide a summary gap analysis based on identified material gaps, along with the expected plan and timing to address these
    2. a description of any plans for capital and liquidity management leading up to a federal continuance
    3. member and key stakeholder engagement to date
    4. plans and timing to hold membership vote 
    5. a description of any provincial requirements the applicant would have to satisfy to continue federally
    6. details on any current operational relationship/arrangement with or investment in the shares of a credit union central and including any planned changes to this if the applicant becomes an FCU.

The following will need to be approved by the Superintendent prior to an applicant conducting its member vote and submitting Phase 2 (Formal Application Review) materials.

Disclosure on Continuance Requirements

The applicant should provide OSFI with a draft member package that includes all of the relevant material outlined in the Disclosure on Continuance Regulations (Federal Credit Unions), including the Notice to be approved by the Superintendent (in consultation with the Canada Deposit Insurance Corporation (CDIC)) prior to circulation.

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