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Cooperatives and mutuals – some of the challenges for regulators
Mario AlbertPresident and CEO
October 11, 2012
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THE ROLE OF THE AUTORITÉ DES MARCHÉS FINANCIERS (AMF)
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THE AMF’S MISSION
• To protect consumers of financial products and services
• To regulate Quebec’s financial sector:
• Solvency of institutions
• Stock market and clearing house activities
• Securities
• Distribution of financial products and services
• To implement protection and compensation programs for consumers of financial products and services
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COOPERATIVES AND MUTUALS IN QUEBEC
• Financial services cooperatives
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397 cooperatives that are members of a federation
41.2% of credit portfolio46.4% of personal deposits
1 caisse that is not a member of a federation
Non-material
39 property and casualty mutual insurance companies
10.4% of market share
26 life and health mutual insurance companies
3.1% of market share
• Mutual insurance companies
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UNIQUE COOPERATIVE MODEL
Differs from the prevailing model in the following areas:
• Governance
• Financing
• Capitalization
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GOVERNANCE: A FEW DIFFERENCES
• Each caisse in the group has an independent structure
• Decentralization of power
• Support functions (risk management, finance, product development…) and regulation are centralized within the Federation
• Federation standards apply to the caisses, but certain policies are caisse-specific
• Elective model
• Legitimacy of the board, but challenges regarding the diversity of skills required
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IMPACT OF GOVERNANCE ON REGULATION
• Decentralization requires the Federation to supervise some of the practices of each caisse or component of the group
• Federations play more of a supportive and advisory role than a decision-making role (as is the case with corporations)
• To supervise the components of the group, the regulator initially uses the work performed by the federations
• Skills requirements are adapted to the elective context; emphasis is placed on access to expertise and training
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FINANCING: PRIMARY DIFFERENCES
• Challenges accessing non-local markets
• Less pressure to pay dividends
• Income is shared with client-members (dividends)
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CAPITALIZATION: PRIMARY DIFFERENCES
• Market restricted to members
• Deposit institutions: financial instruments designed to comply with the new Basel requirements
• Securities are eligible for the best class of capital
• Shareholders’ equity primarily consists of reserves
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THE CHALLENGES, IN A NUTSHELL
• Respecting the unique characteristics of cooperatives...
...while maintaining a regulatory framework similar to that used for banks and insurance companies
• This requires a great deal of effort and creativity from the regulator
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THANK YOU
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