The federal government has taken the first step toward setting up a nationwide system of co-operative banking that would allow credit unions to expand beyond their provincial boundaries and compete nationally against the country's Big Six banks.
The Finance Department has begun consultations that will likely lead to legislation that would let credit unions and caisse populaire movements call themselves banks, and operate in any part of the country.
The aim is to give credit unions and member-owned financial institutions more flexibility so they can market themselves nationally, gain credibility by being able to call themselves "banks," and compete more effectively against existing national banks, finance officials said.
"The credit union is limited in what it can do," said Gary Seveny, president and chief executive officer of Ottawa-based CS Co-op. "But a bank can do business anywhere in Canada."
Ottawa tried to include the initiative in its large package of new financial services measures passed into law last year. But disagreement among the credit unions about how to proceed prompted the federal government to drop the idea and postpone it until the credit unions could agree.
The consultations launched yesterday are an attempt to find a model that all can agree on, officials said.
The previous proposal failed partly because during the discussions several credit unions decided to merge to become a national entity, but the merger never succeeded, officials explained. Also, British Columbia's popular Vancouver City Savings Credit Union pulled out of the discussions.
Federal officials won't put a time line on how long it will take to foster a consensus, write legislation and have it passed by Parliament. But Mr. Seveny estimates it will take at least 18 months.
For his company, it can't happen too soon. CS Co-op has a large federal civil servant clientele, and operates largely in Ottawa. But it is eyeing credit-union-friendly populations just across the Ottawa River in the area around Hull, where it can't currently operate as a member-owned co-op.
CS Co-op has already set up a bank subsidiary that can indeed operate outside Ontario, but it is not member-owned, and can't be until Ottawa passes the new legislation.
"CS Co-op has already started down this road and decided it is the future," Mr. Seveny said.
Still, other credit unions are less eager to expand beyond their provincial borders, insiders say.
Canada has one of the strongest credit union movements in the world, with 703 credit unions and 1,069 caisses populaires in 2000. The sector, which employs 56,400 Canadians, has about $120-billion in assets, and accounts for about 10 per cent of the domestic assets of deposit-taking institutions. The movement is particularly strong in Western Canada and Quebec.