1 / 38

Agenda

DICO Update Credit Union Professionals’ Association Conference November 22, 2013 Andy Poprawa, CEO Guy Hubert, Director , Risk Management Deposit Insurance Corporation of Ontario. Agenda. Overview of the Credit Union Sector Potential Risks DICO Update Current Examination findings

eliora
Télécharger la présentation

Agenda

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. DICO UpdateCredit Union Professionals’ Association Conference November 22, 2013Andy Poprawa, CEOGuy Hubert, Director , Risk ManagementDeposit Insurance Corporation of Ontario

  2. Agenda • Overview of the Credit Union Sector • Potential Risks • DICO Update • Current Examination findings • Questions & Discussion

  3. Ontario Sector Profile Credit Unions and Caisses Populaires

  4. Other Performance Benchmarks * Data as at 2Q 2012 ** as % of Total Assets

  5. Return on Average Assets (2001 – 2013)

  6. Sector Profile by Risk Level (% of Sector Assets)

  7. Sector Profile by DPS Risk Ratings

  8. Loan Costs 2003 - 2013

  9. Commercial Loan Growth

  10. Commercial Loans:Industry Concentration

  11. Commercial Lending Profile * Legend: < 2 = Low, 2-3 = Moderate, 3-4 Moderate-High, >4 High ** Legend: Low risk, Moderate risk, Moderate-High risk, High risk

  12. Loan Impairment 12

  13. Loan Impairments & Coverage Ratios by Size of Credit Union

  14. Three Year Outlook – Potential Risks

  15. Ontario Real GDP(Source: Ministry of Finance Fall 2013 Economic Statement)

  16. Ontario GDP Growth Outlook (Source: Ministry of Finance Fall 2013 Economic Statement)

  17. US GDP Growth Outlook (Source: Ministry of Finance Fall 2013 Economic Statement)

  18. Interest Rate Outlook (Source: Ministry of Finance Fall 2013 Economic Statement)

  19. Canadian Household Debt (Source: Ministry of Finance Fall 2013 Economic Statement)

  20. Canadian Household Net Worth (Source: Ministry of Finance Fall 2013 Economic Statement)

  21. Ontario Housing Prices(Source Central 1) Source: CREA, Central 1 forecasts. Note: MLS residential.

  22. Ontario Job Recovery (Source: Ministry of Finance Fall 2013 Economic Statement)

  23. Ontario Employment (Source: Ministry of Finance Fall 2013 Economic Statement)

  24. Three Year Outlook – Potential Risks

  25. DICO Update • All depositor funds protected • Insurance fund of $162.5 M (68 bps) at 3Q13 • No premium changes planned for 2014 • Target fund of 100 bps by 2020 – no increase expected in premiums • No failures during 2013 - 14 fewer credit unions • Still several outstanding claims with other parties • Risk assessments ongoing – continuing to monitor credit risk trends – 17 credit unions on watchlist

  26. Trend in the Deposit Insurance Reserve Fund and Losses Deposit Insurance Reserve Fund

  27. DICO Priorities for 2014 • ERM requirements for all Class 2 credit unions • New differential premium system starting in 2015 • Implementation of stress testing requirements for credit unions over $1 billion in assets • Expand examination scope & monitoring programs • Prompt action & resolution of high risk situations • Changes to Capital Adequacy Guideline - IFRS • New guidance for Corporate Governance

  28. DICO Examination Team • 6 Examiners • 5 have between 4 – 30 years experience in commercial credit with Credit Union, Banks, Asset-Based Lender • 1 is operations / structural risk specialist • 2 examiners are former internal auditors • Since 2012, most examinations performed by DICO team (specific exceptions)

  29. Risk Elements examined • Credit Risk • Market Risk • Structural Risk • Liquidity Risk • Operational Risk • Strategic Risk (incl. Capital Risk)

  30. Current Examination Findings Credit Risk - Retail Loans • Security – not always assessed properly – not always registered correctly • Debt serviceability – not always assessed conservatively. Sector Risk Assessment: Low

  31. Common Examination Findings Credit Risk - Commercial Loans • No annual reviews • No commitment letters (or not used properly) • LOCs not revolving and margined properly • Reporting requirements not defined (quality) • Excessive concentration (betting the farm)

  32. Common Examination Findings Credit Risk - Commercial Loans • Risk Rating framework not robust • No proper pricing for risk • Watch list process not well defined or utilized • Due diligence for syndicated loans not as robust Sector Risk Assessment: High

  33. Current Examination Findings Market Risk • Usually no issues with practices, but some inconsistencies in policies • Rated Effective in majority of 2013 examinations • Sector Risk Assessment: Low

  34. Current Examination Findings Structural Risk • Increasingly managed through 3rd party • IRR : • Short term (EaR) : largest exposure to falling rates • Long term (EVaR): mostly stable or slight exposure to falling rates • Few excessive mismatched positions • Sector Risk Assessment : Low / Moderate

  35. Current Examination Findings • Liquidity Risk • Quality of assets held for liquidity acceptable • Strategies to attract large deposit broker business have met with limited success. • Funding gaps bridged by broker deposits and /or increased borrowings and/or securitization • Monitoring of large deposits needs to be improved • Contingency liquidity plans not clearly defined • Stress testing not always performed • Sector Risk Assessment: Moderate / High

  36. Current Examination Findings • Operational Risk • Practices usually aligned with policies • Internal Audit function not always aligned with size and complexity of CU • IA’s recommendations not actionned • Division of duties • BCP / DRP not tested regularly • Sector Risk Assessment: Moderate

  37. Current Examination Findings • Strategic Risk • Strategic plan not aligned with size and complexity • No succession plans • Implementation of ERM on target • Directors Training and Competency policy in use • Profitability growth not sufficient to renew capital and support growth objectives • Difference bridged by issuance of Investment shares • Sustainability issues • Sector Risk Assessment: High

  38. Questions & Dialogue

More Related