The Corporation’s long-established approach to protecting depositors is premised on three lines of defense:
1. Credit unions must follow the Corporation’s Standards and regulatory guidelines. The Corporation monitors credit unions to ensure they operate according to the Standards, and can direct credit unions to take action on any issue that poses potential risk to depositors’ funds.
2. Credit unions are required to hold sufficient liquidity and capital to support operations, including business risks. The capital reserves of Saskatchewan credit unions are among the strongest in Canada.
3. The Corporation’s Deposit Guarantee Fund (the Fund) is one of the strongest such funds in the country and is funded through investment earnings and an annual assessment paid by PRFIs.
Standards of Sound Business Practice
The Corporation is empowered by The Credit Union Act, 1998 to establish the Standards for Saskatchewan credit unions. The Standards are approved by the Corporation’s board of directors and filed with the Registrar of Credit Unions (the Registrar). The Standards set minimum requirements and a framework to effectively regulate credit unions.
The Corporation develops regulatory guidelines for credit unions to support the implementation of the Standards. The level of supervision depends on the nature, scope, complexity and risk profile of each credit union. As Provincial Systemically Important Financial Institutions, Conexus and Affinity credit unions are also required to comply with a P-SIFI directive.
The objectives of the Standards include:
• establish principles and minimum requirements for corporate governance and the control environment that contribute to the sound and prudent operations of credit unions and the protection of deposits, and
• prescribe limits and restrictions for credit unions regarding sound business practices to manage and control exposure to risk.
The Standards emphasize the careful and practical judgment that would be exercised by a reasonable person in the financial services industry, having regard to:
• the objectives of the credit union,
• all risks to which the credit union is exposed,
• the amount and nature of the credit union’s liquidity and capital, and
• the regulatory compliance obligations of the credit union.
Pursuant to The Credit Union Central of Saskatchewan Act, 2016, and in consultation with the Registrar, the Corporation establishes Prudential Standards for SaskCentral. These standards set minimum requirements and a framework to effectively regulate SaskCentral.
The objectives of the Prudential Standards are to:
• establish principles and minimum requirements for corporate governance and the control environment that contribute to sound and prudent operations, and
• prescribe limits and restrictions, in the context of sound business practices, to manage and control exposure to risk.
As Provincial Systemically Important Financial Institution, SaskCentral is also required to comply with a P-SIFI directive.
Supervision of PRFIs
In addition to establishing and communicating requirements, the Corporation:
• monitors performance of PRFIs relative to requirements,
• interacts with PRFIs whose results do not meet regulatory or compliance expectations, and,
• intervenes with PRFIs whose performance falls below requirements.
The Supervision of PRFIs is guided by a Supervisory Framework that includes principles, concepts and core processes used by the Corporation. Assessing the safety and soundness of PRFIs is guided by Assessment Criteria that support the determination of a risk profile for each institution.
In fulfilling its role, the Corporation promotes responsible governance by credit unions and SaskCentral, and the strength and stability of the credit union system.