Montréal - The 2010 annual report on financial services cooperatives, tabled today in the Québec National Assembly, indicates that the operating results and solvency of financial services cooperatives have improved in the past three years. Combined assets rose 10% and surplus earnings before member dividends surged more than 36% in 2010.
As at December 31, 2010, 433 cooperatives (463 as at December 31, 2009) were licensed to carry on business in Québec, under An Act respecting financial services cooperatives:
- The Fédération des caisses Desjardins du Québec (FCDQ) and its 430 affiliated cooperatives (460 in 2009);
- The Caisse centrale Desjardins;
- The Caisse des Mutuellistes, Épargne et Crédit (CMEC), the only independent cooperative.
During the 2010 fiscal year, 45 cooperatives affiliated with the FCDQ, compared with 55 in 2009, initiated merger procedures, with these mergers taking effect on January 1, 2011.
The Québec market Source: Institut de la statistique du Québec. The most recent data are dated September 30, 2010. differs from the Canadian market due to the large proportion of financing and deposits held by financial services cooperatives. These cooperatives control 49.5% of the mortgage financing market Includes residential financing for single-family dwellings, multi-rental buildings of 4 units or less, multi-rental buildings of 5 units or more, as well as commercial, industrial, institutional and agricultural financing. and 31.6% of the non-mortgage financing market Consists of consumer, farm and business loans. (compared with 47.8% and 63.1% held by Canadian banks). They also control 47.4% of the personal deposits market, including 37.6% of demand deposits and 54.4% of term deposits. By comparison, Canadian banks have a 48.8% share in this market, holding 55.7% of demand deposits and 44% of term deposits.
Higher surplus earnings
The combined surplus earnings of FCDQ members, before member dividends, stood at $1,414 million as at December 31, 2010, compared with $1,039 million as at December 31, 2009, up 36.11%. CMEC surpluses rose 29% in the year ending on September 30, 2010.
As at December 31, 2010, the FCDQ posted a total capital ratio of 18.73%, compared with 15.81% as at December 31, 2009. This ratio exceeds the minimum requirements of the Capital Adequacy Guideline, which integrates the Basel II standards. The CMEC, for its part, had a total capital ratio of 21.8% as at September 30, 2010, well above the minimum requirements under the Basel I framework.
FCDQ assets were up 10%, rising from $139.5 billion in 2009 to $153.4 billion in 2010. CMEC assets rose 1.9% to $24.6 million as at September 30, 2010.
Prudent oversight by the AMF
In 2010, the AMF updated the Capital Adequacy Guideline to take into account changes arising from the implementation of International Financial Reporting Standards (IFRS). The amended guideline came into effect on December 31, 2010. In the same way, the AMF revamped the Capital Adequacy Guideline: Credit unions not members of a federation, trust companies and savings companies, to bring it into conformity with Basel II and IFRS provisions. The guideline has been in effect since January 1, 2011.
The transition to IFRS on January 1, 2011 introduced changes that could adversely affect the funding of cooperatives, particularly the treatment of employee benefits. However, the Notice relating to the application of International Financial Reporting Standards (IFRS): Accounting practices and capital adequacy requirements, published on June 4, 2010, provides for a transition period to defer the impact of adopting IFRS on the calculation of capital adequacy requirements.
Several other guidelines were published in 2010, including guidelines on business continuity management, investment management and derivatives risk management.
The AMF is now assessing the impact of the new funding rules, adopted worldwide, on financial services cooperatives. One of the objectives of the Basel III reform is to strengthen the quality of capital.
For more information about financial services cooperatives in Québec, and the guidelines published by the AMF, please consult the 2010 report on financial services cooperatives (pdf - 1 MB)This link will open in a new window (in French only). Guidelines are available under the Deposit institutions heading, in the Guidelines section.
The Autorité des marchés financiers ("AMF") is the regulatory and oversight body for Québec's financial industry.
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