The recent amendment to the Credit Unions Act General Regulations, approved on October 25, 2024, establishes new regulatory standards governing unclaimed balances, borrowing restrictions, equity maintenance, and investment standards for credit unions, effective January 1, 2025. These amendments provide clear definitions and procedures, reinforcing oversight, transparency, and sound financial practices to better safeguard depositor assets and are intended to ensure long-term stability within the credit union sector.

A key addition in the amendment is section 1.1, which introduces the definition of “unclaimed balance.” An unclaimed balance is defined as a deposit, including any accumulated interest, that has not had any member-initiated transactions or account statement requests for a duration of ten years. This measure addresses situations where accounts become dormant and ensures credit unions follow specific protocols for managing such funds. Once an account meets the unclaimed balance criteria, credit unions must promptly notify the depositor in writing. This notification, sent to the depositor’s last known address, provides a 30-day period within which the depositor may issue instructions regarding the disposition of the funds. Should the depositor not respond, the unclaimed balance is transferred to the Corporation, relieving the credit union of further liability for the balance.

Section 2 of the amendment revises the borrowing regulations for credit unions, specifying that credit unions are limited in their ability to borrow externally. Under the new regulation, credit unions may only borrow from their members, Atlantic Central, or a financial institution, provided that the terms are approved by the Corporation. This restriction helps to mitigate potential financial risks by ensuring that any external borrowing aligns with the regulatory body’s standards.

Section 4 revises the investment policies applicable to credit unions, emphasizing prudent investment practices. The regulation requires that all investments made by a credit union comply with Corporation-approved policies that embody prudent investment standards. These standards, based on principles a reasonable and prudent individual would apply to a diversified portfolio, are designed to achieve reasonable returns while avoiding undue risk. This prudent approach reduces the likelihood of risky or speculative investments, helping to secure the long-term financial health of credit unions.

Furthermore, Section 4 restricts credit union investment in real estate for operational purposes, limiting such investments to a maximum of 50% of the credit union’s equity unless specifically approved by the Corporation. This limitation serves as a risk control measure, preventing credit unions from over-leveraging their resources in real estate and ensuring they maintain a diversified asset base.

Overall, the amendments to the Credit Unions Act General Regulations reflect an intensified focus on regulatory oversight, stability, and prudent financial management within the credit union sector.

Prince Edward Island (EC2024-950) November 2, 2024