1. Cooperatives and mutuals –
some of the challenges for
regulators
Mario Albert
President and CEO
October 11, 2012
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2. THE ROLE OF THE AUTORITÉ
DES MARCHÉS FINANCIERS (AMF)
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3. THE AMF’S MISSION
• To protect consumers of financial products and services
• To regulate Quebec’s financial sector:
• Solvency of institutions
• Stock market and clearing house activities
• Securities
• Distribution of financial products and services
• To implement protection and compensation programs for
consumers of financial products and services
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4. COOPERATIVES AND MUTUALS IN QUEBEC
• Financial services cooperatives
397 cooperatives that are members 41.2% of credit portfolio
of a federation 46.4% of personal deposits
1 caisse that is not a member of a Non-material
federation
• Mutual insurance companies
39 property and casualty mutual 10.4% of market share
insurance companies
26 life and health mutual insurance 3.1% of market share
companies
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5. UNIQUE COOPERATIVE MODEL
Differs from the prevailing model in the following
areas:
• Governance
• Financing
• Capitalization
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6. GOVERNANCE: A FEW DIFFERENCES
• Each caisse in the group has an independent structure
• Decentralization of power
• Support functions (risk management, finance, product
development…) and regulation are centralized within the
Federation
• Federation standards apply to the caisses, but certain policies are
caisse-specific
• Elective model
• Legitimacy of the board, but challenges regarding the diversity of skills
required
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7. IMPACT OF GOVERNANCE ON
REGULATION
• Decentralization requires the Federation to supervise some of
the practices of each caisse or component of the group
• Federations play more of a supportive and advisory role than a
decision-making role (as is the case with corporations)
• To supervise the components of the group, the regulator initially
uses the work performed by the federations
• Skills requirements are adapted to the elective context;
emphasis is placed on access to expertise and training
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8. FINANCING: PRIMARY DIFFERENCES
• Challenges accessing non-local markets
• Less pressure to pay dividends
• Income is shared with client-members (dividends)
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9. CAPITALIZATION: PRIMARY DIFFERENCES
• Market restricted to members
• Deposit institutions: financial instruments designed
to comply with the new Basel requirements
• Securities are eligible for the best class of capital
• Shareholders’ equity primarily consists of reserves
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10. THE CHALLENGES, IN A NUTSHELL
• Respecting the unique characteristics of
cooperatives...
...while maintaining a regulatory framework similar to
that used for banks and insurance companies
• This requires a great deal of effort and creativity
from the regulator
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11. THANK YOU
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