The story of Credit Union Deposit Guarantee Corporation is also the story of the evolution of Saskatchewan’s credit union system and the unique path the two have travelled together.
The Saskatchewan credit union system developed during the 1930s when the great depression and seven years of drought dealt a devastating blow to the province’s farm economy. Tens of thousands of farmers, especially in the “dust bowl” of southern Saskatchewan, lost virtually everything. Hundreds of businesses failed. Banks closed scores of rural branches in Saskatchewan, as borrowers were unable to keep up loan payments. Obtaining credit became virtually impossible just when people needed it most to make a new start.
Barney Arnason, an economist with the Department of Agriculture, was charged with finding some means of improving the province’s economic outlook. Saskatchewan had some experience with the co-operative model going back to the early 1900s with the Saskatchewan Co-op Elevator Company and Saskatchewan Co-op Wheat Producer Ltd. (the two co-operatives later merged to become the Saskatchewan Wheat Pool) as well as the Co-op Refinery.
Arnason researched credit unions in the United States and Europe and recommended the credit union concept as one solution to the province’s economic woes. In 1934, he shared his work with delegates to a co-operative conference. Following the conference, Barney Arnason led a group commissioned to create the framework for credit union operations.
Legislation followed in 1937 and the people of Saskatchewan began to build the first six credit unions. The credit union movement quickly took root and grew in Saskatchewan. The provincial government created a separate department to support credit union development; Barney Arnason was appointed Deputy Minister and Registrar of Credit Unions and Co-ops. For the next 30 years, department staff travelled throughout the province helping to create credit unions in nearly every community.
Protection of credit union deposits also grew out of hard times. In the early 1950s, poor crops and shipping problems once again put a strain on Saskatchewan farmers. It became clear that in a province heavily dependent on one industry, with fluctuating income levels, it was necessary at all times to maintain a high level of liquidity to meet requests for withdrawal of funds on deposit.
Two incidents of criminal activity in two rural credit unions really drove home the need for deposit protection. Funds in the two credit unions had been lost through misappropriation, putting deposits at risk. The province’s other credit unions, recognizing what this could mean for public confidence, established a support fund that would accept voluntary contributions from credit unions to help out depositors at the two credit unions.
It was also increasingly clear that a permanent solution to this potential problem was needed. Discussion with the provincial government followed and in 1953, the Mutual Aid Fund was created and the Mutual Aid Board appointed to manage it.
The Mutual Aid Fund was the first centralized credit union reserve fund in North America, and the Mutual Aid Board the first organization of its kind. Establishment of the board was groundbreaking and over the years the organization has constantly evolved to stay ahead of emerging changes in its environment.
In 1962, submissions to the federal Royal Commission on Banking, or Porter Commission, exposed the Mutual Aid Board to a national audience. In its report the Commission recognized the unique character of credit unions and recommended establishment of mutual aid funds for all credit unions across Canada.
By the late 60s it became clear that changes were needed to accommodate the desire by credit unions for more business powers and greater autonomy from government.
A major overhaul of Saskatchewan’s credit union legislation in 1972 gave broader business powers and flexibility to credit unions and expanded the role of the Mutual Aid Board. It also entrenched the credit union guarantee in legislation. This meant that the guarantee of full repayment of all funds on deposit wasn’t just a promise, it was the law. The 1972 legislation gave the Mutual Aid Board some responsibility for monitoring credit unions and greater powers to intervene with credit unions that were operating in a way that put depositors’ funds at risk.
A change of name was considered in the early 80s. Although the significance of the name Mutual Aid Board was well understood among credit unions, it meant little to the public and so, in 1983, the name was changed to Credit Union Deposit Guarantee Corporation.
The late 80s saw another set of major changes for the Corporation with the proclamation of new legislation in 1987. The new Act advanced the concept of “prudential self-regulation” long before it was adopted federally or anywhere else in Canada. The Act shifted responsibility for monitoring credit unions from the Registrar of Credit Unions to Credit Union Deposit Guarantee Corporation. It also broadened the Corporation’s authority to develop standards of sound business practice for all credit unions.
The late 90s saw another set of major changes for the Corporation with the passage of The Credit Union Act, 1998. The legislation made Credit Union Deposit Guarantee Corporation the primary regulator for Saskatchewan credit unions. The legislation also allows the Corporation to accept other regulatory responsibilities that may be delegated to it from time to time.
The new millennium brought with it a world of rapid changes at every turn. A world economic and financial crisis necessitated significant changes to international and federal regulatory frameworks. In addition, Saskatchewan credit unions continued to become larger and more sophisticated financial institutions. Through it all, the Corporation evolved its monitoring practices and regulatory requirements to keep Saskatchewan credit union deposits safe and secure.
The Corporation plays an active role in championing an effective regulatory framework and deposit protection regime for Saskatchewan credit unions. This includes providing leadership beyond provincial boundaries to effect positive change.
In 2016 federal legislation was enacted that shifted regulatory responsibility for the provincial credit union centrals from federal to provincial jurisdiction. The provincial government passed The Credit Union Central of Saskatchewan Act, 2016 assigning responsibility for the regulation of SaskCentral to the Corporation.
In over 60 years, Credit Union Deposit Guarantee Corporation has evolved from a mechanism of mutual self-help to an organization that has played a significant role in the shift to a prudential, in-system regulatory model for Saskatchewan credit unions. Since its inception the Corporation has established an exceptional record in deposit security. No one has ever lost a dollar deposited in a Saskatchewan credit union.