2010 Annual Report - Credit Union

Annual Report 2010
www.cudgc.sk.ca
MISSION
We instill public confidence in Saskatchewan credit unions by guaranteeing
deposits. As the primary prudential and solvency regulator, we promote
responsible governance by credit unions and advocate their strength and stability.
VALUES
Values guide individual and organizational behaviour. The Corporation’s values are reflected in its Code of
Conduct which provides a common frame of reference for staff, management and the board in fulfilling the
Corporation’s mission and strategic focus.
•
Co-operation: As part of the co-operative financial services system, we respect co-operative principles
and support credit unions in enhancing their strength and development by working together.
•
Honesty and Integrity: We perform our duties conscientiously with the highest level of honesty and
professional integrity.
•
Fairness: We approach issues and decisions with common sense, sound judgement, fairness
and consistency.
•
Responsible Regulation: We strike an appropriate regulatory balance that effectively protects depositors
without unduly impairing credit unions’ ability to compete in the market.
•
Leadership: We use our knowledge of the credit union system and the financial services industry
to anticipate future trends and proactively respond to our environment. We demonstrate leadership
provincially and nationally by advocating positive change that contributes to the strength and stability
of the credit union system.
•
Teamwork and Respect: We work as a team to achieve goals and progress towards our common vision.
We recognize that people are the key to success. We consistently treat people with dignity, respect, fairness
and the highest standards of ethics. We demonstrate co-operation when working with others, encouraging
questions that generate innovative ideas and creative solutions.
Credit Union Deposit Guarantee Corporation
P.O. Box 3030
2055 Albert Street
Regina, Saskatchewan
S4P 3G8
Phone: (306) 566-1286
Fax: (306) 566-1770
Public internet website: www.cudgc.sk.ca
E-mail: [email protected]
TABLE OF CONTENTS
Report from the Chair. . . . . . . . . . . . . . . . . . . . . . . . . 2
Report from the CEO . . . . . . . . . . . . . . . . . . . . . . . . . 3
Corporate Governance Framework. . . . . . . . . . . . . . . . . . 4
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Executive Management. . . . . . . . . . . . . . . . . . . . . . . . 6
Mandate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Corporate Performance. . . . . . . . . . . . . . . . . . . . . . . . 8
Corporate Performance Measurement. . . . . . . . . . . . . . . . 10
Strategic Focus and Key Initiatives . . . . . . . . . . . . . . . . . 12
Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Management’s Responsibility . . . . . . . . . . . . . . . . . . . . 17
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . 18
2010 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 19
Legislative and Governance Model. . . . . . . . . . . . . . . . . . 28
Profile of Saskatchewan Credit Unions . . . . . . . . . . . . . . . 29
System Performance . . . . . . . . . . . . . . . . . . . . . . . . . 30
Saskatchewan Credit Unions. . . . . . . . . . . . . . . . . . . . . 32
REPORT FROM THE CHAIR
Saskatchewan credit unions are to be congratulated for their strong
financial performance in 2010. Their success is due in large part to
their positive response to today’s more complex regulatory environment.
They have embraced the need for effective regulation and are making the
changes necessary to ensure continued long-term strength and stability.
This put credit unions in an even stronger capital position in 2010 and led
to their most profitable year on record.
With more rigorous regulatory requirements come increased expectations
for how financial institutions are governed. The Corporation holds credit
unions to high governance standards. Likewise, our board is dedicated
to excellence in fulfilling its regulatory responsibilities. In 2010, we
established an audit committee to oversee the integrity of our financial
reporting and control. We also expanded the role of the internal audit
function. An enhanced director orientation process will support recent
changes in the composition of the Corporation’s board of directors.
On behalf of the board, I thank outgoing director Doug Matthies for
his valuable contributions over the years. As a new member of the
board, I appreciate the effective stewardship that has helped to make
the Corporation an industry leader. I look forward to learning from the
experience of our returning board members and the fresh perspectives
of new directors Karen Layng, Deputy Minister of Finance, and Daniel Ish,
an independent director appointed by SaskCentral.
I would like to thank the Corporation’s staff and management for the
care and attention they put into helping Saskatchewan credit unions
position themselves for success in turbulent times. The Corporation has
always strived to build strong relationships with elected leaders and
management. It has worked tirelessly to ensure a regulatory environment
that puts credit unions on a level playing field with others in the financial
services industry. This approach has set a strong foundation for the future
success of Saskatchewan credit unions.
Ed Gebert
2
REPORT FROM THE CEO
For the Corporation and Saskatchewan credit unions alike, 2010 was another
successful year. The Corporation continued to build on our investment in a
prudential, industry-based regulatory framework, keeping us well-positioned
to adapt to changes in the regulatory environment. We successfully
prepared for the introduction of International Financial Reporting Standards
(IFRS) and provided regulatory guidance to credit unions. The Corporation
also took steps to ensure our financial monitoring systems and other core
proprietary systems support compliance with IFRS.
To carry out our mandate, the Corporation relies on a skilled, professional
team that understands the environment and the industry, demonstrates
leadership and effectively manages change. I would like to thank our
talented and capable employees for the commitment that has helped
the Corporation become a leader in financial services regulation.
Despite the lingering effects of more challenging economic conditions,
Saskatchewan credit unions demonstrated characteristic strength and
stability in 2010. With the continued presence of very tight margins, credit
unions reported strong financial results and their most profitable year on
record. This, combined with slower growth, allowed credit unions to build
up their capital positions, bolstering overall financial strength.
The global economic crisis has highlighted the need for enhanced
financial and business practices throughout our industry. As a mature
and highly effective regulatory body, the Corporation is well positioned
to meet these challenges. Saskatchewan credit unions are accustomed
to high regulatory standards. Nevertheless, the direction of the industry
will influence the Corporation and Saskatchewan credit unions, and some
refinements to regulatory standards will be necessary.
Saskatchewan credit unions remain among the strongest, most stable
of financial institutions. However, media attention on the global financial
crisis has dramatically heightened consumer awareness and shaken
confidence in financial institutions around the world. The Corporation’s
depositor awareness campaign is just one way we work to maintain welldeserved confidence in this province’s credit unions. For their part, credit
unions continue to capably manage their operations and business risks,
demonstrating strength through consistent financial results.
Garth Melle
3
CORPORATE GOVERNANCE FRAMEWORK
Our Corporate governance framework sets out
how the organization is directed and controlled.
Maintaining strong governance practices is one
important way the Corporation demonstrates the
strength of its regulatory regime.
Our framework identifies the four main roles
in the governance process and outlines the
relationship between board and management.
Role
Board Responsibilities
Management Responsibilities
Leader
Participates in setting strategic direction
and provides strategic oversight
Leads development of strategic
options and implements strategy
Functions independently from
management
Presents continuous
improvement initiatives
Approves corporate objectives
and performance targets
Supports the board in
implementing governance
processes to guide the work
of the board and its committees
Setting corporate
direction
Approves business plan and policy
Selects and retains qualified and
competent management
Steward
Ensuring an
effective control
environment
and allocation of
resources
Ensures adequate and effective risk
management
Ensures the effective allocation, use
and protection of all resources, taking
the Corporation’s risks into account
Develops and implements
enterprise risk management
strategies and processes
Approves policies for communicating
effectively with stakeholders
Develops appropriate information
for communicating with the board
and stakeholders
Overseer
Sets the “tone at the top”
Exercising
effective control
Monitors operating and financial
performance
Develops an appropriate
control environment including
the governance approach,
organizational structure,
management style, communication
style and policies and procedures
Reporter
Presenting a fair
and objective
picture of the
organization to
stakeholders
Ensures compliance with legislation
and code of conduct
Ensures it receives appropriate
information
Monitors the internal control and
management systems
Obtains independent verification
4
BOARD OF DIRECTORS
Daniel Ish,
Edward Gebert,
Ken Anderson,
Lyn Kristoff,
Rod Crook,
Karen Layng (missing)
AUDIT COMMITTEE
Our board of directors governs the business
and affairs of the Corporation. It helps set
strategic direction and ensures our efforts
support the strength and stability
of Saskatchewan credit unions.
In 2010, the board established an audit
committee, on a one year trial basis, to assist
the board in the oversight of the integrity of
our financial reporting and control. The audit
committee reports regularly to the board about
the Corporation’s:
Our board includes:
three directors appointed by Credit Union
Central of Saskatchewan (SaskCentral)
the Chief Executive Officer of SaskCentral
or nominee
the Deputy Minister of Justice or nominee
the Deputy Minister of Finance or nominee
one director appointed by the government
•
•
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•
•
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The committee also ensures the independence
of external and internal auditors, and that the
Corporation applies appropriate due diligence
in the areas of controls, accountability and
financial reporting. As of December 31, 2010,
the following sat on the audit committee:
As of December 31, 2010, the following sat
on the Corporation’s board:
Edward Gebert, (Chair), SaskCentral appointee
Lyn Kristoff, (Vice-Chair), SaskCentral appointee
Daniel Ish, SaskCentral appointee
Ken Anderson, Chief Executive Officer,
SaskCentral
Rod Crook, Assistant Deputy Minister, Ministry
of Justice and Attorney General
Karen Layng, Deputy Minister, Ministry of Finance
Vacant, director appointed by government
•
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•
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•
5
financial reporting
internal control systems
relationship with auditors
adherence to policy and regulatory requirements
legal and ethical conduct
•
•
•
Lyn Kristoff, (Chair)
Ken Anderson
Rod Crook
EXECUTIVE MANAGEMENT
Linda Jacob, Garth Melle,
Brent Schellenberg, C.A. Hatlelid
Our executive management team provides
strategic vision, leadership and direction to
the Corporation. Our executive team includes:
•
Chief Executive Officer, Garth Melle
•
Vice-President Regulatory Policy and Prevention,
C.A. Hatlelid
•
Vice-President Risk-Based Supervision,
Brent Schellenberg
•
Vice-President Corporate Operations,
Linda Jacob
6
MANDATE
STANDARDS OF SOUND BUSINESS PRACTICE
Credit Union Deposit Guarantee Corporation is
the primary solvency and prudential regulator
for Saskatchewan credit unions. We instill
confidence in credit unions by guaranteeing
deposits and promoting responsible
governance, strength and stability.
The Credit Union Act, 1998 empowers the
Corporation to establish sound business
practices for Saskatchewan credit unions.
Our Standards of Sound Business Practice
set minimum requirements for effectively
managing business risks and establishing
appropriate policies. Credit unions have long
shown a willingness to adopt industry best
practices and each applies the Standards
based on its size, complexity, structure,
diversity, and product and service offerings.
Our risk-based approach to regulation well
positions the Corporation and credit unions
for an increasingly complex future. We continue
to enhance our policies, practices, operating
procedures and infrastructure in support of
the following primary responsibilities:
•
guaranteeing the repayment of deposits
in Saskatchewan credit unions
•
managing the Guarantee Fund consistent
with industry standards
•
define required financial and business
practice standards
•
establishing prudential standards of sound
business practice and monitoring credit union
performance in relation to those standards
•
prescribe required policies and procedures
•
define roles and responsibilities of credit union
directors and managers
The Standards are designed to:
directing credit unions to take immediate action
on any issue that might place depositors’ funds
at risk
•
Our strong focus on prevention and unique
relationship with credit unions contribute to the
fact that no depositor has ever lost funds on
deposit in a Saskatchewan credit union. The
Corporation works closely with credit union
boards, executives and employees. We depend
on their skills and experience to provide an
effective layer of deposit protection within
individual credit unions.
7
The Standards outline required policies
and procedures for:
•
corporate governance
•
strategic management
•
capital and profitability management
•
risk management
In addition to establishing and communicating
the Standards, the Corporation:
•
monitors credit union performance relative
to the Standards
•
follows up with credit unions whose performance
falls below the Standards
•
intervenes directly with a credit union if necessary
CORPORATE PERFORMANCE
It is important to demonstrate that the
Corporation is well-managed with sound
policies and practices consistent with industry
standards. Our regulatory regime is based on
strong governance, effective planning processes
and clear accountability.
ENTERPRISE RISK MANAGEMENT
Enterprise risk management is central to our
governance and strategic planning processes.
It helps us identify, assess and manage
risks across the Corporation. This supports
development of the goals, objectives and
strategies that guide our business plan.
It also helps us establish priorities and
allocate resources.
The Corporation’s enterprise risk management
framework outlines our principal risks, our
risk tolerances and the actions taken to
effectively manage and monitor risk. Each
year, management analyzes the operating
environment, updates the risk assessment
and communicates findings in a Corporate
Risk Report.
We track 20 principal risks divided into five
categories. We added inter-jurisdictional
risk in 2010 to keep the board apprised of
developments arising from issues, such as
pending legislation that would enable credit
unions to operate as federally-regulated
entities, the potential merger of Manitoba
and Saskatchewan centrals, and proposals
to strengthen the resiliency of financial
institutions worldwide.
Insolvency risk – The economic recovery,
increasing capital levels and the strength of our
regulatory approach combined to reduce risks
associated with depositors’ confidence in the
strength and stability of the credit union system
from moderate to low.
Stakeholder relations – The Corporation enjoys
strong support from credit unions and other
stakeholders. We regularly and proactively
interact with all key stakeholders. Risk in this
area has reduced to reasonable.
People – Given their importance to meeting the
Corporation’s mandate, we continue to closely
monitor people-related issues. In 2010, our staff
became direct employees of the Corporation,
giving us more flexibility in adopting personnel
practices. These and other changes have led
to increases in staff satisfaction, which has
improved four years in a row, and decreases in
staff turnover, which was only 3% in 2010.
Information management – We have made
significant progress in this area, reducing
the risk from cautionary to reasonable.
The introduction of a structured project
development methodology has helped ensure
success. New loan reporting standards and
an automated risk matrix support credit union
monitoring processes. A new enterprise content
management strategy supports lifecycle
management of all electronic and paper records.
Business interruption – An effective business
resumption plan and allowances for ongoing
review in this area brought further improvement
within the reasonable category for risks related
to business interruption.
Overall, our risk assessment demonstrates
stability within our environment. Although
growth remains sluggish, the national and
international markets are starting to recover.
Saskatchewan’s economy is expected to lead
the country and credit union performance is
strong. Our analysis in 2010 identified positive
movement in five risks.
8
OVERVIEW OF THE CORPORATION’S RISK ASSESSMENT
The Corporation tracks 20 individual risks divided into the following five principal categories:
Risk Category
Definition
Risk to Depositors
Risks to the strength and stability of Saskatchewan credit
unions arising from a broad range of economic and
environmental factors that may impact depositors’ confidence.
Strategic Risk
Risks associated with the overall effectiveness of the
board and management of the organization, including the
ability to develop and execute appropriate business plans
and strategies.
Regulatory Risk
Risks associated with the failure to comply with laws, rules,
regulations, prescribed practices or ethical standards within
which the Corporation is governed.
Operational Risk
Risks associated with the performance of business functions
or processes within the Corporation. Risks may arise from
deficiencies or breakdowns relative to the control environment,
technology and information systems, human capital or
communication methods.
Financial Risk
Risks associated with the Corporation’s ability to meet financial
obligations and prudently manage its fiscal responsibilities.
Legend
9
UnchangedDecreased
Direction
of Risk
CORPORATE PERFORMANCE MEASUREMENT
The Corporation assesses progress toward its goals and objectives using a set of performance measures
and targets.
Goal: Comprehensive deposit protection regime supported by responsible, balanced regulation
Objectives
Targets
Instill confidence in the safety and
security of Saskatchewan credit unions
90% of depositors believe deposits
are safe or very safe
86%
Manage risk to the Guarantee Fund
90% of credit unions believe
regulatory processes are fair
95%
Provide fair and consistent regulation
2010 Performance
Goal: Credit union strength and stability
Objectives
Targets
2010 Performance
Invest in programs that reduce risk to
the Guarantee Fund
90% of credit unions believe
regulatory processes are fair
95%
Promote sound governance and
strategic management in credit unions
Stakeholder satisfaction survey rate
at 90%
97%
Foster positive working relationships
Organizational effectiveness survey
rate at 80%
74%
10
Goal: Corporate financial strength
Objectives
Targets
Meet deposit protection financial
obligations
1.50% of credit union consolidated
assets plus credit union capital
deficiencies in the Guarantee Fund
1.50%
Financial results meet budget
• Operating expenses of $4.8 million
$4.7 million
Demonstrate fiscal responsibility
2010 Performance
Goal: Sound governance and business practices
Objectives
Targets
Demonstrate best practices in
corporate governance and strategic
management
Board governance self assessment
rating at 85%
85% (2009)*
Stakeholder satisfaction rate at 90%
97%
Organizational effectiveness survey
rate at 80%
74%
Fulfill responsibilities professionally
and with the utmost integrity
Foster a constructive work
environment
*deferred to 2011
11
2010 Performance
STRATEGIC FOCUS AND KEY INITIATIVES
Through an annual planning process, the
Corporation’s board and executive management
identify our key areas of strategic focus. In 2010,
our focus has remained on three key areas:
deposit protection and regulatory excellence,
prevention and corporate excellence. These
strategic focus areas guide our planning and
performance measurement.
International Financial Reporting Standards
(IFRS) – In 2010, the Corporation positioned
itself and credit unions to meet these new
accounting and disclosure requirements. We
worked with our national peers to develop
common regulatory approaches to IFRS
implementation. We also consulted with credit
unions and issued regulatory guidance on the
new standards.
DEPOSIT PROTECTION
AND REGULATORY EXCELLENCE
In 2011, we will complete our transition to IFRS.
We will implement IFRS-compliant accounting
policies, business processes and financial
reports. We will finalize changes to our financial
monitoring system to assess the impact of these
changes on credit union results.
Successful self-regulation has always been
a defining feature of the Saskatchewan credit
union system. As the primary credit union
regulator in the province, the Corporation helps
protect that right by holding credit unions to
standards similar to those recognized nationally
and internationally. This helps credit unions
keep pace with the trend toward increased
scrutiny for all deposit-taking institutions, while
supporting stability and public confidence.
The Corporation uses a risk-based supervisory
framework to assess governance, strategic
and risk management practices, and capital
adequacy in credit unions. Our approach
enhances our ability to monitor, identify and
analyze credit union and system risks to the
Guarantee Fund. It identifies risks early, giving
credit unions the information and guidance
they need to resolve issues proactively.
As we advocate for an effective regulatory
structure in Saskatchewan, the Corporation
provides leadership beyond provincial
boundaries. We see our strong working
relationships with other national and provincial
regulators as a way to bring about positive
change, manage jurisdictional issues and
gain efficiencies that minimize regulatory
burden for credit unions.
Awareness of the Deposit Guarantee –
We made good progress in our campaign
to enhance credit union staff and member
awareness and understanding of the deposit
guarantee. We issued a regulatory directive
prescribing parameters for the appropriate
use of information related to the guarantee. To
ensure consistent messaging we developed
credit union training tools and a banner for
placement on credit union websites, and
launched a new public website. Credit unions
were provided with promotional items for
depositor awareness events in credit union
branches, as well as inserts for member
statements.
Standards of Sound Business Practice – In
2011, we will begin a comprehensive review of
the Standards to ensure our requirements are
aligned with our supervisory approaches and
keeping pace with national and international
regulatory reforms. The changes will keep credit
unions on a level playing field with their main
competitors and position them to take advantage
of federal powers if they choose. Our review will
include consultation with the Registrar of Credit
Unions, SaskCentral and credit unions.
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PREVENTION
CORPORATE EXCELLENCE
Prevention is the Corporation’s key strategy for
managing risk. Our preventive programs help
credit unions operate prudently and manage
risk proactively, providing an effective first level
of deposit protection. This lessens the need
for the Corporation to intervene and protects
against claims on the Guarantee Fund. Strong
stable credit unions facilitate the system’s
ability to operate effectively and instill
depositor confidence.
The Corporation strives for excellence in all
areas of our business, guided by:
The Corporation actively shares its perspective
on the aggregate and individual performance of
credit unions in relation to the broader industry.
This information equips credit union leaders to
make informed choices about their futures.
As credit unions become larger and more
complex, we rely more than ever on our positive,
constructive working relationship. Assigned
contacts within the Corporation take the lead
in our relationship with each credit union. This
strengthens our understanding of their strategic
plans and direction, and supports our proactive
approach.
Preventive strategy – In 2010, our peer group
meetings brought the province’s small to midsized credit unions together to discuss trends
in the economy and the financial services
industry. The meetings were an opportunity
for constructive and open dialogue around
challenges and strategic considerations
for credit unions as a result of emerging
international and federal developments.
The Corporation also supported SaskCentral
initiatives, including fraud management
workshops and deposit services training,
that reinforce our preventive approach.
In 2011, a director workshop for credit union
board members will be one of the ways we
ensure decision-makers are equipped to make
informed choices about long-term direction and
future service delivery in their credit unions.
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•
a governance framework that guides
decision-making and clarifies the authority
and accountability of board, management
and staff
•
a comprehensive strategic planning process
•
an enterprise risk management framework that
helps us identify and assess risks to the credit
union system and the Corporation
•
a communication strategy that balances
openness with the need to be conscientious
about how we treat confidential information
We recognize that a constructive work
environment and effective, satisfied employees
are key to organizational effectiveness. Our
corporate culture recognizes the contribution
individuals make to organizational goals,
promotes teamwork and collaboration, and
encourages leadership at all levels.
Corporate governance – Enhanced director
orientation processes introduced in 2010
supported changes in the composition of the
Corporation’s board of directors. The board
established an audit committee and expanded
the scope of our internal audit function. In
2011, we will continue to review and enhance
programs for board development.
Support Services Agreement – In 2010, the
Corporation entered into a support services
agreement with SaskCentral. The new
agreement reflects a more traditional approach
to outsourcing with enhanced accountability and
reporting. In 2011, we will continue to monitor
the potential merger between the Manitoba
and Saskatchewan centrals for regulatory
and operational impacts.
People – We recognize that our employees
are our greatest asset. We continued to
support ongoing professional development
and held team building events to enhance staff
relations and interactions between work units.
In 2010, our staff became direct employees
of the Corporation, giving us more flexibility
in establishing human resource policies and
giving employees the opportunity to participate
in workplace committees. The Corporation uses
results from staff surveys and an annual marketbased compensation review to monitor progress
and identify priorities in this area.
Technology systems – In 2010, we automated
our risk matrix and began additional work
to ensure our financial monitoring system
will comply with new International Financial
Reporting Standards (IFRS). In 2011, we
will develop requirements to redesign the
Corporation’s proprietary technology systems
in response to changes in financial services
regulation. A key aspect of this work will be the
research, development and implementation of
a new financial monitoring system to meet the
Corporation’s needs into the future.
Our low turnover rate – just 3% in 2010 –
demonstrates that this continued focus on our
most important resource is paying off. In 2011,
the Corporation will introduce a leadership
development program and launch a longterm succession planning process for key
management roles.
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FINANCIAL SUMMARY
DEPOSIT GUARANTEE FUND
Saskatchewan credit unions are stable and
well-capitalized, our regulatory model is sound
and we have one of the strongest funds in North
America. Originally created by credit union
contributions, the fund is sustained today by
investment interest and annual assessments
paid by credit unions. The fund covers the costs
of the Corporation’s deposit protection and
regulatory responsibilities.
The current target for the fund is 1.50%
of the total assets of Saskatchewan credit
unions, plus an amount equal to the regulatory
capital shortfall in any credit union. As of
December 31, 2010, the fund was at target with
$210.6 million or 1.50% of total assets. All credit
unions meet regulatory capital requirements.
Guarantee Fund Balance
(% of consolidated credit union assets plus capital shortfalls)
Guarantee Fund Balance
1.80
(in $ millions)
220
1.70
200
1.60
180
1.50
160
1.40
140
1.30
120
15
2006
2007
2008
2009
2010
2006
2007
2008
■ Guarantee Fund Balance
2009
2010
1.5% target
INCOME AND ASSESSMENTS
Yield on Investments (%)
6
In 2010, each credit union paid an assessment
of nine basis points or 0.09% of total deposits to
the Guarantee Fund. Another source of revenue
is the interest earned on the fund’s investments.
At December 31, 2010, the investment portfolio
yield fell slightly to 3.51%, reflecting continued
low interest rates.
5
4
3
2
1
0
2006
2007
2008
2009
2010
In thousands ($)
2006
2007
2008
2009
2010
Guarantee Fund assessments*
2,509
3,589
7,040
10,191
10,982
597
590
908
21
–
7,230
7,469
7,926
7,797
7,578
2007
2008
2009
2010
Master Bond Fund revenue**
Investment Income
*Guarantee Fund assessment for 2006 and 2007 is after rebate.
**The Master Bond Fund balance was distributed to credit unions in 2009.
OPERATING EXPENSES
In thousands ($)
2006
Credit union assistance
360
–
50
–
225
Preventive services*
121
80
58
115
94
Operations
3,746
4,027
4,149
4,526
4,691
Income Tax
369
555
603
491
436
Master Bond Fund expenses
539
578
963
962
–
*Preventive services include costs associated with programs to support effective risk management in credit unions.
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MANAGEMENT’S RESPONSIBILITY
Management of the Corporation is responsible for preparing and ensuring the integrity, reliability
and completeness of the accompanying financial statements. All financial statements were prepared
in accordance with Canadian generally accepted accounting principles.
In discharging its responsibility, management designs and maintains the necessary accounting systems
and related internal controls to provide reasonable assurance that transactions are authorized, proper
records maintained and assets safeguarded.
The Board of Directors of the Corporation oversees management’s responsibilities for the financial reporting
procedures and internal control systems. The board reviews the financial statements in detail prior to
approving the statements for publication.
The Audit Committee recommends the appointment of the external auditor and reviews the terms of the
external audit engagement, annual fees, audit plans and scope, and management letter recommendations.
Garth Melle
Chief Executive Officer
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Linda Jacob
Vice-President, Corporate Operations
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors
Credit Union Deposit Guarantee Corporation
We have audited the accompanying financial statements of Credit Union Deposit Guarantee Corporation,
which comprise the balance sheet as at December 31, 2010, and the statement of operations, comprehensive
income and fund balance and statement of cash flows for the year then ended, and a summary of significant
accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Canadian generally accepted accounting principles, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted
our audit in accordance with Canadian generally accepted auditing standards. Those standards require that
we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of Credit
Union Deposit Guarantee Corporation as at December 31, 2010, and its financial performance and its cash
flows for the year then ended in accordance with Canadian generally accepted accounting principles.
Chartered Accountants
Regina, Saskatchewan
February 25, 2011
18
Credit Union Deposit Guarantee Corporation
2010 FINANCIAL STATEMENTS
As at December 31 [in thousands]
BALANCE SHEET
20102009
$$
Assets
Cash
2,417740
Investments [notes 4, 7 and 9]
208,702197,464
Income tax receivable [note 6]
5695
211,175198,299
Liabilities
Accrual for credit union assistance
225–
Accounts payable [note 5]
353816
578816
Fund balance
Deposit Guarantee Fund [note 10]
210,597197,483
210,597197,483
211,175198,299
See accompanying notes
On behalf of the Board of Directors:
DirectorDirector
19
Credit Union Deposit Guarantee Corporation
2010 FINANCIAL STATEMENTS
Year ended December 31 [in thousands]
STATEMENT OF OPERATIONS, COMPREHENSIVE INCOME AND FUND BALANCE
20102009
$$
Revenue
Credit union assessment
10,98210,191
Interest from investments
7,5787,797
Master Bond Fund revenue
–21
18,56018,009
Expenses
Credit union assistance
Preventive services [note 8]
Operational services [note 8]
225–
94115
4,6914,526
Master Bond Fund recovery [note 1]
–(25)
Master Bond Fund rebate [note 1]
–987
Income before income taxes
Income taxes [note 6]
Net income and total comprehensive income
Fund balance, beginning of year
Net earnings
Fund balance, end of year
5,0105,603
13,55012,406
436491
13,11411,915
197,483185,568
13,11411,915
210,597197,483
See accompanying notes
20
Credit Union Deposit Guarantee Corporation
2010 FINANCIAL STATEMENTS
Year ended December 31 [in thousands]
STATEMENT OF CASH FLOWS
20102009
$$
Cash flows from operating activities
Net income
13,11411,915
Items not affecting cash:
Amortization of investment premiums
2,1941,985
Changes in non-cash working capital:
Accrued interest
Income tax receivable
Accrual for credit union assistance
Accounts payable
Cash flows from operating activities
214(177)
39(95)
225–
(463)(66)
15,32313,562
Cash flows from investing activities
Purchase of investments
(46,559)(60,584)
Proceeds from redemption of investments
32,91347,664
Cash flows used in investing activities
(13,646)(12,920)
Net increase in cash
Cash, beginning of year
Cash, end of year
1,677642
74098
2,417740
Supplemental information
Income taxes paid [note 6]
See accompanying notes
21
397627
Credit Union Deposit Guarantee Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31 [in thousands]
1. NATURE OF OPERATIONS
2. CHANGES IN ACCOUNTING POLICIES
Credit Union Deposit Guarantee Corporation
(the Corporation) is a body corporate
established and continued by Section 442
of The Credit Union Act, 1998. It has existed
since July 1, 1952 and commenced operations
in 1953. The Corporation is responsible for
guaranteeing repayment to depositors of the
full amount of deposits held in Saskatchewan
credit unions. The Corporation operates within
policies and standards established by its Board
of Directors (the Board). Management exercises
judgment in establishing financial commitments.
The Corporation has not adopted any new
significant accounting policies effective for
its fiscal year ended December 31, 2010.
Prevention is a primary deposit protection
strategy for the Corporation. Programs are
sponsored and developed to strengthen the
knowledge and skills of credit union decisionmakers. Credit union performance is monitored
in accordance with the Standards of Sound
Business Practice to ensure early identification
of risks and actions required to protect deposits.
The Deposit Guarantee Fund is funded through
investment earnings and annual assessments
collected from credit unions. The Corporation
has established a fund target based on credit
union system assets plus individual credit union
capital deficiencies. The Corporation collects an
annual assessment that is adjusted periodically
in relation to fund target.
The Master Bond Fund was used to offset
losses, up to specified limits, arising from
crime related risks such as embezzlement,
robbery, and forgery. Funding occurred
through investment earnings and regular
annual assessments collected from credit
unions. Claims that exceeded the specified
limits were covered by insurance negotiated
with an established insurance provider. On
January 1, 2009, the Corporation transferred
administration of the credit union insurance and
bonding program to CUMIS General Insurance
Company. On June 30, 2009, the Master Bond
Fund balance of $987 was returned to credit
unions on the basis that it was collected over
the previous five years.
3. SIGNIFICANT ACCOUNTING POLICIES
a) Financial instruments
Financial assets and financial liabilities are
initially recognized at fair value at acquisition
and their subsequent measurement is dependent
on their classification as described below.
Their classification depends on the purpose
for which the financial instruments were
acquired or issued, their characteristics
and the Corporation’s designation of such
instruments. Settlement date accounting is used.
Classification
Cash
Investments
Accounts payable
Held for trading
Held to maturity
Other liabilities
Held for trading
Held for trading financial assets are financial
assets typically acquired for resale prior to
maturity or that are designated as held for
trading. They are measured at fair value at
the balance sheet date.
Held to maturity
Held to maturity financial assets are nonderivative financial assets with fixed or
determinable payments and a fixed maturity
that an entity has the positive intention and
ability to hold to maturity. These financial
assets are measured at amortized cost
using the effective interest method.
Other liabilities
Other liabilities are recorded at amortized
cost using the effective interest method
and include all financial liabilities, other
than derivative instruments.
22
Credit Union Deposit Guarantee Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31 [in thousands]
3. S
IGNIFICANT ACCOUNTING POLICIES
(continued)
a) Financial instruments (continued)
Transaction costs
Transaction costs are expensed as they occur.
Effective interest method
The Corporation uses the effective interest
method to recognize interest income or expense,
premiums or discounts earned or incurred for
financial instruments.
Derivative instruments
The Corporation does not utilize derivative
products as part of its operation. As at
December 31, 2010, the Corporation does not
have any outstanding contracts or financial
instruments with embedded derivatives.
Fair value
The fair value of a financial instrument is the
amount of consideration that would be agreed
upon in an arm’s-length transaction between
knowledgeable, willing parties who are under
no compulsion to act.
b) Revenue recognition
Assessment revenue is recognized in the year
the assessment is charged to credit unions.
Rebates are recognized when authorized by
the Board and distributed to credit unions.
c) Credit union assistance
Credit union assistance is recorded only
when it can be reasonably determined by
the Corporation that such a payment will be
required. An allowance for assistance requires
the exercise of judgment because the precise
amount, method and timing of such assistance
is dependent upon future events. Actual losses
could differ from these estimates.
23
A specific allowance for assistance will
be established when it can be reasonably
determined by the Corporation that financial
assistance is required and can be attributed
to an individual credit union. The amount of the
allowance will be determined by management’s
assessment of the credit union’s financial state
and potential cost to the fund.
A general allowance for assistance builds on
the concept of early recognition of potential
assistance situations. The allowance considers
the likelihood of the need for future credit union
assistance, the potential impact of market and
economic conditions and the Corporation’s
historic loss experience.
d) Future income taxes
The Corporation follows the asset and liability
method of accounting for income taxes, whereby
future income taxes are determined based on
the difference between the carrying values of
assets or liabilities, and their tax bases using
the tax rates expected to be in effect when the
asset or liability is settled.
e) Future accounting changes
The Corporation will be required to prepare
its financial statements in accordance with
International Financial Reporting Standards
(IFRS), as issued by the International Accounting
Standards Board (IASB), for its fiscal year
beginning on January 1, 2011, including
comparative information for 2010.
Credit Union Deposit Guarantee Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31 [in thousands]
4. INVESTMENTS
2010
$
2009
$
Term to maturity
Category
0 - 1
1 - 3
3 - 5
5 - 10
10 - 15 Carrying Fair
Carrying Fair
year years yearsyears years value value valuevalue
Government
of Canada
3,78215,48223,630
–
– 42,894
5.80%2.25%2.58%
–
– 2.75%3.66%
Yield (1)
Provincial
governments
Yield (1)
Municipals
Yield (1)
Concentra
Financial
Yield (1)
Yield Commercial
securities Yield (1)
87,33489,518
6,68029,64715,432 20,169 5,811 77,73980,821
3.45%3.18%3.83% 4.29%4.57% 3.72%3.66%
8,287 7,07510,033 5,906
2.93%4.13%4.33% 4.61%
34,52935,711
– 31,30132,597
– 3.97%4.04%
16,00016,808
6,650
3,600–
1,750–
12,000
12,498
4.64%
2.95%–
4.83%–
4.16%4.56%
Chartered banks 1,422 23,699
(1)
16,73817,031
43,116
8,605
5.07%3.26%4.51%
2,1135,533
–
33,726
30,53531,736
–
–
34,693
–
– 3.66%4.25%
–
– 7,6467,819
7,7237,973
4.29%
4.35%– ––
4.33%4.33%
Asset/Mortgage
backed securities 1,599–– ––
1,599
1,608
2,5942,657
Yield (1)
4.69%–– ––
4.69%4.47%
30,533 85,036
57,700
27,825
5,811
206,905213,152
195,453201,434
Accrued interest
1,7972,011
208,702197,464
(1)
represents weighted average effective interest rates based on year-end carrying values
24
Credit Union Deposit Guarantee Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31 [in thousands]
4. INVESTMENTS (continued)
7. LINES OF CREDIT
The Corporation invests in fixed income
securities with priority on safety, liquidity and
return, with repricing dates matching maturity
dates for the majority of its investments.
The Corporation has the following authorized
lines of credit available with Concentra Financial:
The Corporation earned $661 (2009 – $809)
from investments in Concentra Financial
Services Association (“Concentra Financial”)
during the year.
The Corporation’s investments in highly-rated,
traditionally structured, asset backed securities
(ABS) as of December 31, 2010 is 0.77%
(2009 – 1.31%) of the investment portfolio.
All principal and interest payments have been
received by the Corporation as scheduled.
These investments are monitored and assessed
on a quarterly basis to ensure they continue to
meet their obligations.
The following methods and assumptions were
used to estimate fair values of investments:
Fair values of investments, excluding
investments in Concentra Financial, are based
on quoted market prices when available or
quoted market prices of similar investments.
Fair values of investments in Concentra
Financial are calculated using the tiered
Concentra Financial long-term redeemable
rates, which are observable market-based
rates, relative to the remaining term to maturity
and the dollar value of the investments.
5. ACCOUNTS PAYABLE
Accounts payable are generally paid within
three months with the exception of unclaimed
balances that are due on demand.
6. INCOME TAXES
Income taxes are provided for at a rate of
approximately 15.5% (2009 – 15.5%) of earnings
subject to tax. Credit union assessments and
assistance are not taxable transactions.
25
20102009
$$
Operating line of credit
2,000
2,000
Line of credit for credit
union assistance
10,000
10,000
12,00012,000
The lines of credit are renewed annually and
have an interest rate equal to Concentra
Financial’s floating prime rate of interest, payable
upon demand with interest payable monthly.
The Corporation has pledged investments with
a market value of $12,498 (2009 – $12,818) and
a carrying value of $12,000 (2009 – $12,200) as
security for the lines of credit. The market value
of pledged assets must be not less than 100% of
the authorized credit as stated in the agreement.
The Corporation monitors the pledged assets on
a quarterly basis.
8. RELATED PARTY TRANSACTIONS
On January 1, 2010, the Corporation’s
management services agreement with Credit
Union Central of Saskatchewan (SaskCentral)
was replaced with a support services agreement
reflecting a more traditional outsourcing
arrangement. SaskCentral is owned by the
credit unions that fund the Corporation through
assessments. SaskCentral owns 84.3% of the
non-voting Class A shares and 49% of the voting
membership shares of Concentra Financial.
The Corporation holds minimal share capital
of SaskCentral.
Credit Union Deposit Guarantee Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31 [in thousands]
8. RELATED PARTY TRANSACTIONS (continued)
The composition of the Corporation’s Board
(seven positions) is provided for in provincial
legislation, The Credit Union Act, 1998. In
addition to SaskCentral’s chief executive officer,
SaskCentral appoints three board members to the
Corporation’s Board, at least two of which cannot
be a board member or employee of SaskCentral.
During the year, operational services of
$638 (2009 – $3,861) and preventive services
of $94 (2009 – $115) were purchased from
SaskCentral under the support services
agreement. The services are in the normal
course of operations and are measured at
the amount of consideration established and
agreed upon. At year end, $6 (2009 – $472)
is the amount due to SaskCentral and included
in accounts payable.
9. N
ATURE AND EXTENT OF RISKS ARISING
FROM FINANCIAL INSTRUMENTS
The nature of the Corporation’s holdings of
financial instruments exposes the Corporation
to credit, liquidity and market risk.
This listing is based on high credit quality
ratings from Dominion Bond Rating Service
and also includes unrated Concentra Financial
term deposits.
The Corporation monitors investments on a
monthly basis. The status of the investment
portfolio in relation to performance targets
is reported to the Board at each regular
board meeting. An exception to policy will be
immediately reported to the chief executive
officer and in writing to the Board.
The Corporation’s investment portfolio credit
quality ratings are as follows:
Investment Portfolio Rating*
AAA
2010
2009
CarryingCarrying
Amount $ Amount $
61,31732,372
AA
101,155114,181
A
32,43332,900
Unrated
12,00016,000
Credit risk
Accrued Interest
Credit risk is the risk of loss associated with
a counterparty’s inability or unwillingness to
fulfill its payment obligations. Credit risk may
arise from principal and interest amounts on
the Corporation’s investment portfolio.
Total Investments
The Corporation manages credit risk through
adherence to board-approved policy and
practice for the acquisition of investments.
Safety of principal is accomplished by ensuring
that all investments purchased are reasonable
and prudent. Investment decisions are made
with due diligence to avoid undue risk of
loss while obtaining a reasonable return. The
Corporation has established a listing of eligible
investments that meet the above requirements.
Market risk
206,905195,453
1,797
2,011
208,702
197,464
* per Dominion Bond Rating Service
Market risk is the risk of loss that may arise from
changes in market factors, notably interest rates.
Interest rate risk is the potential adverse impact
on earnings due to changes in interest rates.
The Corporation’s policy is to primarily invest in
fixed income securities and to purchase with the
intent to hold to maturity. Accordingly, interest
rate risk arises from the re-pricing of investments
as they mature.
26
Credit Union Deposit Guarantee Corporation
NOTES TO THE FINANCIAL STATEMENTS
Year ended December 31 [in thousands]
9. N
ATURE AND EXTENT OF RISKS ARISING
FROM FINANCIAL INSTRUMENTS (continued)
Market risk (continued)
The Corporation will not participate in lending
of securities or purchasing of investments in
foreign currencies, nor participate in derivative
transactions. These policies help to mitigate the
Corporation’s exposure to market risk.
The investment portfolio is monitored by
management on a monthly basis to ensure
compliance with the policies, and reported
to the Board at each regular board meeting.
The fair value of the investment portfolio is
subject to fluctuation as a result of normal
market risk. The principal factor influencing
the fair value is the prevailing rate of interest.
Applying a present value calculation
demonstrates that an increase of 1% in interest
rates will result in a decrease of approximately
$6,096 or 2.86% (2009 – $6,284 or 3.12%) in the
fair value of the investment portfolio. Conversely,
a decrease of 1% in interest rates will result in
an increase in the fair value of the same amount.
Changes to interest rates have no impact on net
income because investments are classified as
held-to-maturity.
Liquidity risk
Liquidity risk arises from the inability to
generate or obtain the necessary cash or its
equivalents in a timely manner, at a reasonable
price, to meet organizational commitments. In
particular, the risk arises from failure to meet
the Corporation’s day-to-day operational
needs or deposit protection obligations.
The Corporation’s policy is to maintain sufficient
liquidity to meet its cash flow obligations. The
ability of the Corporation to meet cash flow
obligations is achieved by the structure of
investments and identification of operational
requirements. Accordingly, term-to-maturity
guidelines have been established to help mitigate
liquidity risk. The status of the investment portfolio
in relation to these guidelines is monitored on a
regular basis and reported to the Board at each
regular board meeting.
To further manage liquidity risk, the Corporation
has $12 million in authorized lines of credit
available with Concentra Financial (note 7).
27
10. FUND MANAGEMENT
The Corporation’s objective when managing
the Deposit Guarantee Fund is to establish a
fund target that instills confidence, comfortably
accommodating all anticipated risks to the fund
during normal business cycles, and provides
a cushion in more difficult periods. The current
target for the Deposit Guarantee Fund is
1.5% of the total assets of Saskatchewan
credit unions, plus an amount equal to the
regulatory capital shortfall in any credit union.
At December 31, 2010, the Deposit Guarantee
Fund is 1.5% (2009 – 1.47%) of the total assets.
The fund balance is monitored on a regular
basis by management. Quarterly financial
reporting to the Board includes the fund status.
If at any time the fund balance is below or in
excess of the target, management will provide
the Board with a documented plan to bring the
fund back in line with the policy.
The Corporation is not subject to externally
imposed capital requirements.
11. COMPARATIVE FIGURES
Certain of the previous year’s comparative
figures have been reclassified to conform
to the current year’s presentation.
LEGISLATIVE AND GOVERNANCE MODEL
Saskatchewan credit unions are regulated
by The Credit Union Act, 1998 and The Credit
Union Regulations, 1999. They are expected
to comply with the Corporation’s Standards
of Sound Business Practice and credit union
articles, bylaws and policies. Credit unions
also have legal rights and responsibilities
under common law and various other provincial
and federal statutes.
REGULATORY ROLES
The regulation of Saskatchewan credit unions
is a shared responsibility.
Saskatchewan Legislature – The Saskatchewan
Legislature establishes public policy and enacts
legislation for the financial services sector,
including credit unions.
Credit Union Deposit Guarantee Corporation
– The Corporation is the primary regulator for
Saskatchewan credit unions. As a prudential
and solvency regulator, we focus mainly on
deposit protection and credit union strength
and stability.
Saskatchewan Credit Unions – Credit unions
are autonomous co-operative organizations
that provide financial services to members and
non-members, if authorized in the credit union’s
articles. Each credit union is required to conduct
business in a sound and prudent manner.
Credit Union Central of Saskatchewan
(SaskCentral) – SaskCentral is controlled by
Saskatchewan credit unions and acts as a trade
association, service provider and manager of
provincial liquidity.
Registrar of Credit Unions – The Registrar
has ultimate responsibility and authority for
regulating Saskatchewan credit unions, focusing
primarily on consumer protection and the public
interest. The Registrar may delegate powers and
authority to the Corporation.
Regulatory Roles
Saskatchewan
Legislature
Deposit Guarantee and
In-System Regulator
(Solvency)
Credit Union
Deposit Guarantee
Corporation
Regulated Credit Unions
(Retail & Service)
Public Policy
and Legislation
Registrar
Government Regulator
(Consumer Protection
& Public Interest)
Saskatchewan
Credit Unions
Credit Union Trade Association
& Support (Liquidity)
SaskCentral
28
PROFILE OF SASKATCHEWAN CREDIT UNIONS
Saskatchewan credit unions are independent
co-operative organizations owned and controlled
by their members. An elected board of directors
governs each credit union’s business and
affairs, and provides strategic direction to
managers responsible for day-to-day operations.
Credit Unions and Service Outlets
Credit unions have long been a dominant
presence in the Saskatchewan market. They
serve more than 520,000 members in more than
300 service locations in over 270 communities.
Co-operative values set credit unions apart
and make them integral to more than just the
province’s economy. Known for their leadership
in community support and development, credit
unions balance making a profit with giving back
to the members and communities they serve. In
2010, they distributed $20.4 million in patronage
payments and dividends.
150
With a network of subsidiaries, credit unions
offer a complete range of financial products and
services to meet the growing needs of members.
Saskatchewan credit unions are successfully
meeting the challenges of the rapidly changing
financial services industry and increasing
regulatory requirements. They continue to enhance
governance practices, strengthen enterprise
risk management processes, and employ
comprehensive audit and compliance functions.
Considering recent economic challenges and
low interest rate environments, Saskatchewan
credit unions performed well in 2010. With a
return to strong financial results, credit unions
demonstrated their ability to withstand difficult
times. Growth returned to more traditional levels
with system assets reaching $14 billion, up 4.1%
over 2009. Loans grew 3.7%, while deposits
rose 3.9%.
At the end of 2010, there were 64 credit unions
in the province. While the pace of consolidation
has slowed in recent years, we expect credit
union mergers to continue, resulting in larger,
more complex credit unions providing financial
products and services to meet the demands of
today’s sophisticated consumers.
29
350
300
250
200
100
50
0
2006
2007
2008
■ Credit Unions
2009
2010
■ Outlets
Number of Employees
(full-time equivalent)
3700
3600
3500
3400
3300
3200
3100
3000
2900
2006
2007
2008
2009
2010
SYSTEM PERFORMANCE
RISK PROFILE OF SASKATCHEWAN
CREDIT UNIONS
The Corporation uses industry-accepted
standards to review and assess the financial
condition, safety and soundness of Saskatchewan
credit unions. We evaluate the risks credit unions
are exposed to and examine how effectively they
manage and mitigate those risks.
We have applied our risk–based monitoring to
all 64 credit unions at least once. The process
gives each credit union a composite risk rating,
representing the Corporation’s overall assessment
of safety and soundness. Our model includes four
levels of composite risk: low, moderate, above
average and high.
In 2010, we reviewed 22 credit unions
representing over 26% of system assets.
Credit unions have implemented a number
of initiatives to mature their risk management
processes. This, combined with strong earnings
and increasing capital ratios, improved the
composite risk rating in 2010 from moderate
to low.
In 2010, 98% of credit unions fall in the low
or moderate risk category. This means they
meet or exceed industry standards and, on
average, have the risk management practices,
and capital and earnings offset needed to
protect themselves in adverse business or
economic conditions.
FINANCIAL PERFORMANCE
Following a challenging year for the financial
services industry, Saskatchewan credit unions
continue to demonstrate that they are among
the strongest, most financially sound financial
institutions. With profits of $88 million, 2010
was their most profitable year on record.
By increasing revenue while containing
costs, credit unions increased profitability
and improved efficiency. With a return
on average assets of 0.64%, credit union
profitability exceeded budget (0.49%)
and 2009 results (0.43%).
Operating Return on Average Assets
and Return on Average Assets (%)
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
2006
2007
2008
2009
■ Operating ROA
— ROA
2010
Composite Risk by % of Credit Unions
2%
64%
■ Above Average
34%
■ Moderate
■ Low
30
As expected, growth moderated in 2010.
Growth in assets, loans and deposits slowed
to more normal levels after four years of above
average growth. System assets grew by 4.1% to
$14 billion. Loans and deposits showed similar
levels of growth at 3.7% and 3.9% respectively.
This more moderate growth allowed credit
unions to build up capital.
Growth (%)
14
The Corporation closely monitors credit union
capital levels. We pay particular attention to
risk-weighted capital or the amount of capital
relative to the risk in a credit union’s assets. We
also monitor the strongest and most permanent
form of capital, tier 1 capital, relative to a credit
union’s assets. With increased profitability and
slower growth, credit unions’ capital ratios were
the strongest they have been since the concept
of risk-weighted capital was introduced. Riskweighted capital increased to 12.14% and tier 1
capital reached 7.68%.
12
10
Capital Adequacy (%)
8
14
6
12
4
10
2
8
0
2006
2007
2008
■ Asset
■ Loan
2009
■ Deposit
2010
6
4
2
0
2006
2007
2008
2009
2010
■ Eligible Capital / Risk-weighted Assets
Risk-weighted Capital Requirements
■ Tier 1 Capital / Assets
Tier 1 Capital Requirements
31
SASKATCHEWAN CREDIT UNIONS
Regulated credit unions in Saskatchewan as of December 31, 2010
Credit Union Name
Head Office
Credit Union Name
Head Office
ACE Credit Union
Regina
LeRoy Credit Union Limited
LeRoy
Accent Credit Union
Quill Lake
Luseland Credit Union Limited
Luseland
Advantage Credit Union
Melfort
Macklin Credit Union Limited
Macklin
Affinity Credit Union
Saskatoon
Mankota Credit Union
Mankota
Bengough Credit Union
Bengough
Mendham-Burstall Credit Union
Mendham
Biggar and District Credit Union
Biggar
Midale Credit Union
Midale
Broadview Credit Union Limited
Broadview
Morse Credit Union, Limited
Morse
Bruno Savings and Credit Union Limited
Bruno
Muenster Credit Union Limited
Muenster
Churchbridge Credit Union
Churchbridge
New Community Credit Union
Saskatoon
Colonsay Credit Union
Colonsay
North Valley Credit Union
Esterhazy
CONEXUS Credit Union 2006
Regina
Pierceland Credit Union Limited
Pierceland
Cornerstone Credit Union Financial Group Limited
Tisdale
Plainsview Credit Union
Kipling
Crossroads Credit Union
Canora
Porcupine Credit Union Limited
Porcupine Plain
Cypress Credit Union Limited
Maple Creek
Prairie Centre Credit Union (2006) Ltd.
Rosetown
Debden Credit Union Limited
Debden
Prairie Pride Credit Union
Alameda
Delisle Credit Union Limited
Delisle
Radius Credit Union Limited
Ogema
Diamond North Credit Union
Nipawin
Raymore Credit Union
Raymore
Dodsland and District Credit Union Limited
Dodsland
Rockglen-Killdeer Credit Union Limited
Rockglen
Earl Grey Credit Union Limited
Earl Grey
Sandhills Credit Union
Leader
Eastend Credit Union, Limited
Eastend
Saskatoon City Employees Credit Union
Saskatoon
Edam Credit Union Limited
Edam
Shaunavon Credit Union
Shaunavon
Elfros-Mozart Credit Union
Elfros
Spectra Credit Union
Estevan
Foam Lake Savings and Credit Union Limited
Foam Lake
Spiritwood Credit Union Limited
Spiritwood
Goodsoil Credit Union Limited
Goodsoil
Springside Credit Union Limited
Springside
Govan Credit Union Limited
Govan
St. Gregor Credit Union, Limited
St. Gregor
Herbert Credit Union Limited
Herbert
Stoughton Credit Union Limited
Stoughton
Horizon Credit Union
Melville
Synergy Credit Union Ltd.
Lloydminster
Hudson Bay Credit Union Limited
Hudson Bay
TCU Financial Group Credit Union
Saskatoon
Innovation Credit Union
North Battleford
Torquay Credit Union Limited
Torquay
Kerrobert Credit Union Limited
Kerrobert
Turtleford Credit Union Limited
Turtleford
Lafleche Credit Union Limited
Lafleche
Unity Credit Union Limited
Unity
Landis Credit Union Limited
Landis
Weyburn Credit Union Limited
Weyburn
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OPERATING PRINCIPLES
Our principles provide direction on how to carry out the Corporation’s roles and
responsibilities. They are what make us unique. These philosophical insights have
contributed to the Corporation’s notable success throughout its history and provide
guidance in shaping the Corporation’s future.
Responsibility
Self-Regulation
As the primary prudential and solvency regulator,
we support and encourage a successful credit
union system by working with stakeholders to
balance prudential regulation with market forces.
•
We exercise great care and judgment in carrying
out the authority that has been granted to us.
•
We are responsible to act when others are either
unwilling or unable to take action on matters
concerning credit union and system solvency and
the safety of deposits.
We recognize the need for credit unions to evolve
in the marketplace and we support a strong and
prosperous credit union system by:
Accountability
•
focusing on the future of the financial services
industry
•
•
striving towards leading edge approaches and
industry best practices
We demonstrate accountability through fiscal
responsibility.
•
•
developing flexible and enabling approaches to
effective and efficient regulation
We pursue economical business solutions to
protect deposits and minimize costs to the credit
union system.
•
Our operating methods demonstrate effective and
efficient use of system resources.
Our role is to regulate, not to manage. Our actions
demonstrate our preference to prescribe rather than
restrict, and demonstrate our respect for a credit
union’s right to determine its own destiny.
We believe that effective deposit protection is
accomplished through investments in prevention
including:
•
analyzing credit union performance on an ongoing
basis to ensure early identification of potential risks
•
communicating our expectations
•
sponsoring and promoting programs that
strengthen the knowledge and skills of credit union
decision makers
Authority, Responsibility, Accountability
Authority
•
We clearly communicate to all stakeholders our
authority to take action to protect deposits. The
Corporation has the authority to act to fulfill its
deposit protection responsibilities in the best
interests of the credit union system.
Objectivity and Independence
Our actions are free of influence, interest or
relationship that would impair professional
judgment or objectivity.
We act independently and in the best interests of
the Corporation to protect depositors’ funds.
We carry out our responsibilities fairly and consistently,
basing decisions on careful analysis of facts.
Openness
We communicate openly with all stakeholders.
We respect our stakeholders’ rights to privacy and
confidentiality of information.
We value the opinions and ideas of our
stakeholders and take care to ensure that we
consult with them on matters that affect them.
Collaborative Relationships
Through constructive relationships with our
stakeholders, we create opportunities to enhance
the overall quality and effectiveness of our results.
We believe that the best solutions are arrived at by
working with others to build common understanding
and to identify and achieve common goals.
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