First West vote to become federal

Summary#

This is a notice from First West Credit Union (dated September 27, 2021) to its members about a vote to allow the credit union to apply to become a federal credit union under the Disclosure on Continuance Regulations (Federal Credit Unions). If the continuation happens, deposit insurance for First West accounts would move from Credit Union Deposit Insurance Corporation (CUDIC) coverage to Canada Deposit Insurance Corporation (CDIC) coverage, with votes to be cast between November 1, 2021 and November 21, 2021.

What it does#

• Asks members to vote on special resolutions that would let First West Credit Union apply to become a federal credit union.
• If the credit union becomes federal on the “continuation day” (when the Letters Patent of Continuance are issued and federal regulators sign off):
  • CUDIC coverage would end for deposits at First West on that day.
  • CDIC coverage would begin for deposits that are eligible under CDIC rules.
• Gives a transition rule for deposits already held on the continuation day:
  • Pre-existing demand deposits get transitional CDIC protection for 180 days (after that they fall under CDIC’s normal rules).
  • Pre-existing fixed-term deposits (like GICs) keep transitional protection until they mature.
  • Deposits made after the continuation day are covered only by CDIC’s standard rules from the day they are made.
• Highlights important differences between CUDIC and CDIC coverage:
  • CUDIC currently insures the full amount of many deposits. CDIC’s standard limit is $100,000 per category (principal plus interest) for each member institution.
  • CDIC does not insure some things that CUDIC does, such as certain non-equity shares and traveller’s cheques. CDIC also excludes deposits payable outside Canada and deposits where the Government of Canada is a preferred claimant.
• Notes upcoming CDIC changes: effective April 30, 2022, RESPs and RDSPs become separate CDIC categories (and some tax-holdback deposits are merged into other categories).
• Makes clear that member approval to apply does not guarantee the credit union will become federal; approvals from Canada’s Minister of Finance and other regulators are still required.

Who's affected#

• Primary: members and depositors of First West Credit Union.
• Especially affected:
  • People with large account balances that exceed $100,000 in a single CDIC insurance category at First West.
  • Members holding instruments that CUDIC currently insures but CDIC does not (for example, certain non-equity shares or traveller’s cheques).
  • Members with deposits payable outside Canada or deposits where the federal government has priority—these may lose coverage under CDIC.
• If unclear: the notice is targeted at First West members; broader groups are not directly affected unless they bank with First West.

Why it matters#

• The change can reduce protection for some depositors. Under CUDIC many deposits were insured for the full amount; under CDIC the normal ceiling is $100,000 per category. That matters if you keep more than $100,000 in one CDIC category at First West.
• The transitional rules give temporary protection for existing deposits, but only for 180 days for demand accounts and until maturity for term deposits. After that, CDIC limits apply.
• Some types of holdings that members might assume are insured today may no longer be covered under CDIC. That could affect how people arrange accounts or move money.
• The vote is a first step; becoming a federal credit union still depends on federal approval. Members who may be affected should review the member package from First West (available at branches and at First West’s voter information site) and check CUDIC and CDIC websites for details.