Incorporating and Registering a New Credit Union or Caisse Populaire

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​Credit unions and caisses populaires are provincially regulated deposit taking financial institutions which operate on co-operative principles, are member owned, and are permitted to conduct business primarily with their members. They are incorporated and regulated under the Credit Unions and Caisses Populaires Act, 1994 (the Act).

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The Financial Services Commission of Ontario (FSCO) and the Deposit Insurance Corporation of Ontario (DICO) are jointly responsible for regulating credit unions and caisses populaires under the provisions of the Act and ensuring their compliance with its provisions. The Act establishes compliance requirements for consumer protection, corporate governance, the sale of securities, capital, liquidity and exposure to interest rate risk.

Overview of Ontario's Credit Union Sector

Ontario's credit union sector is mature, as some financial institutions have been operating for over 100 years. In the last 30 years, there has been a steady decline in the number of credit unions in Ontario ― although the sector's total assets have increased ― due to ongoing mergers and acquisitions.

Financial services are now widely available at affordable prices. Consumers have the option to conduct their banking at a number of different financial institutions, including banks and credit unions, both online and in person. This means there is stiff competition to gain new clients.

Financial institutions are sophisticated corporations that require a lot of resources to operate. New entrants to the credit union sector should expect to face very high barriers to entry and many challenges along the way. In their first few years of operation, credit unions and caisses populaires will require a substantial amount of funding. In addition, senior management will need to have a significant amount of experience, knowledge and expertise to successfully operate the credit union or caisse populaire.

The ongoing consolidation trend in this sector poses a threat to new entrants and must be considered in the proposed new credit union's or caisse populaire's business plan. To be successful, potential new entrants need to identify a unique niche or sub-segment of the credit union market that is either not being served, or that is being underserved by other financial institutions. This also needs to be translated into a viable business plan.

Minimum Requirements

The request to incorporate and register a new credit union or caisse populaire must, at a minimum, contain the following information:

• a cover letter that explains the intent to incorporate and register a new credit union or caisse populaire;
• the results from the feasibility study;
• a business plan;
• the proposed articles of incorporation and proposed by-laws;
• the proposed offering statement to raise the required level of capital; as applicable, and

• all applicable application fees (as outlined in the Minister's Schedule of Required Fees).

For more information, read How to Incorporate and Register a New Credit Union or Caisse Populaire in Ontario Size: ## kb​.

Preparing the Application for Incorporation

A large part of the work in preparing the application for incorporation lies in developing the business plans and policies that are required to successfully operate a credit union or caisse populaire, and that are necessary to satisfy the requirements that are outlined above.

This work is divided into three phases:

1. feasibility phase
2. business plan phase
3. policy development phase

FSCO recommends that the first board of directors be closely involved in all three phases that are outlined below. This will ensure they gain the specific knowledge that is necessary to successfully operate a credit union or caisse populaire. 

Feasibility Phase

The feasibility phase determines the type and volume of demand for a new credit union's or caisse populaire's services, and the commitment of the community to its development. This includes:

• commitment from the community to support the credit union or caisse populaire by using its services;
• commitment to risk money for supplying capital which will bear the cost of any losses; and
• commitment to provide unpaid volunteers who will participate in the credit union's or caisse populaire's board and committees, and possibly work at the credit union.

 This phase typically includes a survey of the community, the development of plans and making
preliminary financial assumptions. 

Business Plan Phase

Once feasibility is established, a detailed business plan must be developed for the next five to 10 years of operation, with particular emphasis on the first five years of operation. This business plan should be based on the feasibility study. The numbers in the plan should be measured within the context of attainability, using comparisons to statistics from similar credit unions and to norms (such as margins and rate projections in the financial marketplace). The business plan should also include a thorough assessment of the target market, stress testing scenarios, a technology plan, a media plan and an exit plan. The exit plan is a significant component of the business plan, as it needs to address the scenario of what will happen if the credit union's or caisse populaire's business plan does not succeed.

The initial business plan will need to be updated annually. This will ensure the credit union or caissse populaire has a continuous plan for its ongoing operation. It will also be useful for measuring the credit union's or caisse populaire's performance by its board, its members and industry regulators.

Policy Development Phase

The Act requires every credit union and caisse populaire to:

• Have policies covering lending and investment, interest rate risk management, governance, and certain prescribed minimum standards;
• Comply with the standards of sound business practices that have been established by DICO;
• Have satisfactory policies in a number of other operational areas; and
• Follow requirements for consumer protection that are set out under the Act.

Next Steps 

Incorporating a new credit union is a significant endeavor that requires up to two years of time and effort, plus a significant investment of resources.

Before preparing an application, potential applicants must read the document on How to Incorporate and Register a New Credit Union or Caisse Populaire in OntarioSize: ##b​ for a complete overview of the requirements, information on how to submit an application, and other important information on starting a new credit union.

Potential applicants should also refer to sections 12 through 23  of the Act for detailed information.