The craziness with OSFI’s* ridiculously restrictive ruling regarding Canadian credit unions’ use of certain words is gaining more widespread attention. My need for affiliation with this cause compels me to comment once again.
I must first declare I’m a credit union member, not a credit union employee. As such, I have neither seen nor heard the rationale behind OSFI’s ruling (assuming there is one) that as of June 30th 2019, credit unions can no longer use the words “bank”, “banker” or “banking“. However, I am open to wild speculation on the rationale . . . assuming one exists.
I assume the folks who work for OSFI must be pretty smart—after all, it’s a very important role they play—I think. Unfortunately, being individually smart does not necessarily lead to making smart decisions as a group. I operate on the basis that people don’t intentionally make senseless decisions, so even though something may not make any sense to me, it certainly must make sense to whomever made that decision. I can’t imagine any reasonably intelligent person or persons would intentionally make what to them is a senseless decision. This post is my attempt to make sense of what appears senseless . . . to me.
Possible Justifications (for OSFI’s Decision to force credit unions to abandon the use of “bank”, “banker” and “banking”):
- They are trying to protect consumers from confusing banks with credit unions. [Not likely a problem to solve, given that satisfaction with credit unions has consistently surpassed that of banks for years. There is obviously a difference].
- They are trying to protect consumers’ assets. [Hmm. Credit unions and their members came through the previous financial crisis in relatively great shape. And in most provinces, deposit guarantees far exceed that of the banks].
- The banks have been lobbying hard to get some of the wording of The Bank Act enacted because they are embarrassed by the success of credit unions and preventing them from using “bank” will distract them from providing great, caring service so the banks can copy their approach. [I see this as a distinct possibility!].
- Credit unions should be lumped in with other organizations that are not regulated federally (FinTechs, etc.). [While it’s true that most credit unions are not regulated federally, they are heavily regulated (most would say excessively) by provincial regulators].
- OSFI believes its mandate is strictly to REGULATE—the more regulations, the better. [This in spite of the fact that excessive (i.e. prophylactic) regulation, rather than protecting consumers, actually does the opposite. It inhibits the opportunities for innovation that can improve the services, products and yes . . . security measures required to protect consumers’ assets].
Potentially Relevant Anecdote: I once worked for a company with a credit manager who ensured the parent company didn’t lose a nickel by tightly restricting and controlling the credit offered to its dealers. As a consequence, many dealers could not access sufficient credit to purchase new products that were being launched. The result? No credit loss for the parent company—not a bad thing on its own. However,
- there was highly restricted growth for the dealers because they had no product to sell;
- it upset consumers who couldn’t buy the new products that were launched at great expense and with much fanfare;
- the parent company didn’t generate nearly the revenue potential of the new products;
- and let’s not forget to mention reputation damage for the dealers and parent company as well.
When the focus of the credit manager changed from avoiding any loss to helping the dealers grow solid, profitable and sustainable businesses, everyone started to benefit. Perhaps it’s time for OSFI to expand its focus to include allowing for solid, profitable and sustainable alternatives to banks, rather than burdening them with the many costs associated with eliminating the words bank, banker and banking from . . . well, from everything.
- At the meeting where the ability for credit unions to use bank-like terms was being discussed, the windows were open wide as the RCMP was burning certain illegal botanicals.
- OSFI wasn’t getting enough public attention, their corporate egos were suffering and they figured this was a good way to enter the national spotlight. [If that was their intention, it certainly had THAT effect!]
- OSFI heard a rumour that Donald Trump was not a fan of credit unions (as well as climate change initiatives). In order to maintain good relationships with US financial institutions, they took action to show their disdain for a valuable alternative to banks. [Not outside the realm of possibility, I fear].
- And the most likely rationale for hammering credit unions into submission? This one really scares me . . . I suspect there may have been subtle yet powerful influences applied to OSFI by Vladimir Putin and his allegedly non-existent team of skilled hackers. [This actually seems the most likely. If the Canadian paparazzi happen to spot Jeremy Rudin, Superintendent of Financial Institutions sharing tea with Putin, it will definitely be time to be very, very afraid]!
So, what do you think? Can you think of other possible reasons for the actions of OSFI? Love to hear them . . . please join the speculation!
(*Office of the Superintendent of Financial Institutions)