First West seeks federal credit union status

Summary#

First West Credit Union posted a notice (dated September 27, 2021) telling members they will vote from November 1, 2021 to November 21, 2021 on whether to let the credit union apply to become a federal credit union under the Disclosure on Continuance Regulations (Federal Credit Unions). If that happens, deposit protection would switch from the provincial Credit Union Deposit Insurance Corporation (CUDIC) to the federal Canada Deposit Insurance Corporation (CDIC), which has different coverage rules.

What it does#

• Asks members to approve a move that would let First West Credit Union apply to become a federal credit union.
• If the move is completed (it still needs federal approvals), membership in CUDIC would end for First West deposits and First West would become a member of CDIC.
• On the day of change (the “continuation day”), CDIC would start insuring deposits that meet its rules. CUDIC insurance would stop applying that same day.
• During a transition period:
  • “Pre-existing” deposits (money already held on the continuation day) that are eligible under CDIC would be protected by CDIC to the same extent they were by CUDIC during the transition.
  • The transition period lasts 180 days for demand deposits (e.g., chequing/savings). For term deposits (e.g., GICs), the transition ends at maturity or when cashed out.
  • Deposits made on or after the continuation day would get only standard CDIC coverage, not the transitional protection.
• After the transition, standard CDIC rules apply: insurance is up to $100,000 per eligible category, per institution.
• Some differences highlighted:
  • CUDIC currently covers some things that CDIC does not (for example, certain non-equity shares and some traveller’s cheques).
  • CDIC does not insure deposits payable outside Canada or deposits where the federal government is a preferred claimant; CUDIC did not have that restriction in the same way.
• Note: Effective April 30, 2022, CDIC was set to add RESPs and RDSPs as separate insured categories and to change how certain property-tax deposits are treated.

Who's affected#

• Mostly customers and members of First West Credit Union — anyone with accounts, GICs, or other deposits there.
• People with large balances (more than $100,000) in the same CDIC category at First West could see a reduction in insured protection after the transition.
• People holding instruments that are covered by CUDIC but not by CDIC (for example, some non-equity shares or certain traveller’s cheques) could lose insurance protection.
• It’s unclear from the notice whether any particular corporate or business accounts will be affected differently; the main impact is on depositors.

Why it matters#

• The move changes who guarantees your money if the credit union fails. Under CUDIC, many deposits were fully insured. Under CDIC, most eligible deposits are limited to $100,000 per category. That can matter if you keep more than that in one category at First West.
• Some kinds of holdings that were protected by CUDIC may not be protected by CDIC after the switch. That could require members to rethink where they keep certain funds or investments.
• There is a temporary safety net: pre-existing eligible deposits get transitional protection for a limited time (180 days for demand accounts or until GIC maturity). But new deposits after the switch get only standard CDIC limits.
• The change is not final — First West still needs federal approvals. Members voting yes would only let First West apply; it does not make the switch automatic.