To make commercial lending more viable for credit unions, Finance Minister Carole James has announced a reduction in the amount of capital a British Columbia-incorporated credit union must hold in relation to commercial loans and leases.
This change means credit unions can maintain a lower amount of capital for commercial loans and leases. Specifically, the amount of capital credit unions are required to hold for commercial lending has been reduced when commercial lending is between 30% and 35% of the credit union’s unweighted assets.
Credit unions are key lenders for small businesses in British Columbia. This is particularly the case in in rural communities where a credit union is often the only financial institution in a community. The change to the cap for commercial lending recognizes the associated risks inherent to commercial lending and brings B.C. more into line with capital requirements for such lending in other Canadian provinces. It also allows credit unions to continue to provide affordable financing and banking services to small business owners.
In 2014, the Ministry of Finance began a broad review of the Financial Institutions Act and the Credit Union Incorporation Act to ensure that the regulatory framework continues to be effective, efficient and modern. As part of the legislative review, government is looking at comprehensive changes to capital requirements including eliminating prescriptive rules like the commercial lending cap.
Minister of Finance Carole James –
“By making commercial lending more viable, credit unions have the opportunity to further support small businesses and grow local economies and jobs. This increase to the commercial lending cap will help provide a boost for our rural communities because credit unions are often the only option available in those communities.”