The Corporation’s deposit protection model provides three levels of protection for deposits.
• sound credit union operations
• capital reserves
• deposit guarantee fund
Prevention is Deposit Guarantee Corporation’s key deposit protection strategy. The preventive approach includes high standards of sound business practice, comprehensive monitoring practices, intervention if required, preventive programs and regulatory policy and guidance. This preventive approach ensures sound credit union operations.
- the Standards of Sound Business Practice and other regulatory policy and guidance
- supervisory practices such as regular monitoring to ensure credit unions are performing relative to the Standards, and intervention if required
- preventive programming that strengthens the knowledge and skills of credit union boards and management
Provincial legislation allows Credit Union Deposit Guarantee Corporation to establish standards of sound business practice that Saskatchewan credit unions are required to follow, and to monitor credit unions to ensure they are operating according to those standards.
The Corporation also sets out policy to bring the Standards into effect and issues regulatory guidance to assist credit unions.
The Corporation works with credit unions to identify risks to depositors’ funds – early identification of risk allows a credit union to take appropriate action to reduce or eliminate the risk.
The Corporation will intervene when a credit union is operating in a way that may put depositors’ funds at risk and fails to take action to reduce the risk.
The Corporation invests in preventive initiatives such as training opportunities for credit union decision makers. These training opportunities enhance their ability to protect deposits at the credit union level.
Standards of Sound Business Practice
Credit Union Deposit Guarantee Corporation, in consultation with the Registrar of Credit Unions, establishes Standards of Sound Business Practice (Standards). The objectives of the Standards are to:
- 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
- prescribe limits and restrictions for credit unions in the context of sound business practices to manage and control exposure to risk
A credit union’s application of these principles and requirements is dependent on its size, complexity, structure, and diversity and product/service offerings. The Standards are contained in three separate documents:
- The Standards of Sound Business Practice, that relate to credit union operations and business practices
- The Standards of Sound Business Practice – Capital Adequacy Requirements, that pertain specifically to capital adequacy requirements
- The Standards of Sound Business Practice – Liquidity Adequacy Requirements, that pertain specifically to liquidity requirements
Credit unions are required to hold adequate capital to support operations including business risks. The capital reserves of Saskatchewan credit unions are among the strongest in Canada.
Credit unions are required to have their operations and financial statements reviewed annually by independent auditors.
These practices all contribute to the strength, stability and integrity of capital reserves.
The guarantee fund is managed by Credit Union Deposit Guarantee Corporation. It is a pool of money set aside to provide for the repayment of the full amount of funds on deposit in Saskatchewan credit unions. It is one of the strongest guarantee funds in North America.
The guarantee fund is maintained through an annual assessment paid by credit unions and interest earned on the fund.
It is invested in high quality guaranteed fixed income investments, such as government bonds.
The Corporation engages third party experts to independently validate the strength of the guarantee fund.