Credit unions across the country will once again be able to use the words “bank,” “banker” and “banking” to describe what they do, thanks to a one-line entry buried on page 356 of the federal budget.
Last June, the Office of the Superintendent of Financial Institutions (OSFI) announced it would start applying the rules of the Bank Act to all non-bank financial service providers, such as trust and loan companies and unregulated financial service providers — which meant they wouldn’t be able to use the words bank, banker or banking.
After an outcry from credit unions over how difficult it would be to compete fairly with banks, and over the cost of updating things like websites, signage and marketing materials, the federal government said in August it would review the matter. Because of that review, OSFI suspended its advisory.
“I’m quite pleased that the government has recognized that credit unions should use banking vernacular that Canadians are used to using, so we’re very supportive of the changes,” said Martha Durdin, president and CEO of the Canadian Credit Union Association.
Credit unions provide banking services to 5.6 million Canadians.
The federal budget said credit unions would have the “flexibility to use generic bank terms.”
What changes would have been made?
Had the advisory remained in effect, credit unions would have had to remove the phrasing in stages. The policy would have required changes to websites by the end of 2017, to print materials by June 30, 2018, and to signage by the end of June 2019.
Durdin said because the OSFI advisory had been suspended, credit unions didn’t go about making changes to signage, marketing materials, advertising, legal documents and websites. She said the estimated cost to make those changes was over $80 million.
Why were credit unions under fire?
A posting on OSFI’s website last June said the reason for the initial restriction was that it had noticed an increase in the use of the words bank, banker and banking by non-bank financial service providers.
Last July, CBC business correspondent Scott Peterson said people he had spoken to in the banking industry told him the government regulator was under heavy pressure from the Canadian Bankers Association to impose restrictions on the use of the word bank by credit unions.