The Standards of Sound Business Practice Regulation, known as Manitoba Regulation 89/2022, was amended effective March 25, 2024, as detailed in M.R. 22/2024 under the Credit Unions and Caisses Populaires Act. These amendments update the regulatory framework for credit unions and similar financial entities in Manitoba, with a focus on risk assessment and classification based on credit ratings. Notably, two new definitions were added: “credit rating,” which primarily refers to Standard & Poor’s long-term issue credit rating, and “OSFI,” the Office of the Superintendent of Financial Institutions of Canada.

Changes were made to the risk weighting calculations for various securities and loans, particularly in Section 2.10, which now categorizes securities issued or guaranteed by the Government of Canada or provincial governments more explicitly. The previous clause regarding “Balance sheet assets” in Section 2.13 was removed, streamlining the focus on specific risk categories. A new section, 2.14.1, was introduced to detail risk weightings for securities from provinces outside of Manitoba, with ratings ranging from 0% for AAA to AA- ratings to 150% for those rated below B-.

Section 2.14.2 outlines the risk weightings for securities and loans linked to municipalities and public sector entities, clearly defining what constitutes a “municipality” and “public sector entity” to ensure regulatory compliance. In Section 2.14.3, risk weightings for deposits and securities issued by financial institutions are categorized based on product maturity, with covered bonds attracting a lower risk weight. Furthermore, a new framework for corporate debt securities was established in Section 2.14.4, enabling credit unions to apply specific risk weightings based on the issuer’s credit rating, which ranges from 20% for high-rated securities (AAA to AA-) to 150% for those rated B+ or lower.

Section 2.14.5 provides guidance on risk weightings for various equity and debt instruments, distinguishing between government program-related investments and speculative unlisted equity. It includes provisions for venture capital investments, allowing more favorable risk treatment if the credit union demonstrates sufficient due diligence. Additionally, Section 2.17 clarifies risk weightings for agricultural and commercial loans, detailing specific categories based on property value relative to loan amounts, which improves risk management for credit unions.

Several sections also underwent formula adjustments, particularly in how risk weightings are calculated. For instance, Section 2.18 updates the formula to A = B × C, with subsequent sections clarifying dependencies on prior amendments to maintain consistency.

By introducing clear definitions, refining risk weightings for various securities, and restructuring loan categories, the regulation aims to foster sound business practices, ensuring that credit unions can effectively manage risks while maintaining stability. This evolution in regulation reflects Manitoba’s efforts to align with national standards and strengthen the financial ecosystem within the province.

Manitoba (22/2024) March 22, 2024