Self-Regulation Desjardins perspective Supervision: a responsibility to share May 2014 Previously...
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Transcript of Self-Regulation Desjardins perspective Supervision: a responsibility to share May 2014 Previously...
Self-RegulationDesjardins perspective
Supervision: a responsibility to share
Self-RegulationDesjardins perspective
Supervision: a responsibility to share
May 2014
Previously presented: June 2012
May 2014
Previously presented: June 2012
2
Presentation Agenda
Financial Cooperatives Surveillance
(components)Prevention
Supervision
Protection
History ( Supervision and ‘Security fund’
interlinked)
Supervision models (Costs consideration)
Question Period
3
Prevention
Legal Framework (adequate)
Supervision
Internal control system
Inspection (mostly on-site control)
External audit
Protection
Security/Stabilization Fund vs Deposit Insurance
Surveillance components (3)
4
1932-1949
1932 - Inspection department and creation of the Federation; 1948 – 1949 Coops (2) liquidation and bankruptcies
1949- 1979
Establishment of the first Stabilization fund
1980-1985
Independent corporation start-up
1985-1996
Development of the corporation
1996 to present (Fund strengthening and Consolidation)
Supervision highlights at Desjardins
5
1949-1979 Appearance of the first Security Funds
Year Number of
Caisses
Caisse Assets
($million)
Caisse Assessments
Subsidies paid
Net Value
Net value / Caisses assets
(bp)
Net value Objective
(bp) 1949
1 068 208 $16 000 -- $16 000 0.8 --
1979
1 258 10 016 $2.1million $1.9 million $4.2 million 4 --
6
1982• 496 out of 1 465 (1/3) caisses running deficits• Special, exceptional fees = 1/10 of 1% of caisse assets
1980-1985 Founding and start-up of an independent corporation
Year Number of
Caisses
Caisse Assets
($million)
Caisse Assessments
($million)
Subsidies paid
($million)
Number of Caisses
Subsidized
Net value
($million)
Net value / Caisse assets
(bp)
Net value Objective
(bp)
1980
1 372 11 655 1.3 4.2 90 1.2 0 50
1982
1 465 15 466 32.5 32.2 187 (7.4) (5) 50
1985
1 381 21 426 35.2 4.8 38 65.0 30 50
7
1986-1995 Development of the corporation
Year Number of
Caisses
Caisse Assets
($million)
Caisse Assessments
($million)
Subsidies paid
($million)
Number of Caisses
Subsidized
Net value ($million)
Net value / Caisse assets
(bp)
Net value Objective
(bp)
1986
1 371 23 891 34.1 2.7 16 92.4 38 50
1995
1 318 51 962 28.5 30.2 30 316.3 61 50
8
1996 to present
Fund Strengthening and Consolidation
YearNumber
of caisses
Caisse Assets
($million)
Caisse Assessment
($million)
Subsidies paid
($million)
Number of caisses
subsidized
Net Value ($mil-lion)
Net Value / caisses assets (p.b.)
Net Value Objective
(p.b.)
1996 1 307 53 585 29,5 23,6 50 332,8 62 100
2011 402 127 025 40,3 0 0 757,1 60between 55 and
65
9
Net worth ratio (2000-2011)in % of caisses assets
0,50%
0,52%
0,54%
0,56%
0,58%
0,60%
0,62%
0,64%
0,66%
0,68%
0,70%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Années
% d
e l
'ac
tif
de
s c
ais
se
s
10
1949-1979 Appearance of the first security funds
1980-1985 Founding and start-up of an independent corporation : Corporation de fonds de sécurité de la Confédération Desjardins
1986-1995 Fund Growth
1996 - … Fund Strengthening and Consolidation
History (Recap)
11
Internal supervision (or self supervision)
By the apex organization in a federated/integrated network
External (or direct) supervision
By the regulatory authorities in charge of the financial cooperatives sector
Parallel supervision
Integrated supervision (2 types)
Auxiliary
Delegated
Supervision models (supervision used with the meaning of ‘inspection’)
12
Prevention
Legal Framework (adequate)
Supervision
Internal control system
Inspection (mostly on-site control)
External audit
Protection
Security/Stabilization Fund vs Deposit Insurance
It’s about…..Risks assessment and risks management
13
Primary Coops member’s savings protection
Trust and credibility
Various stakeholders
Government authorities
Federations and Networks
Financial sustainability
It’s about…..
Question PeriodQuestion Period
Fonds de sécurité DesjardinsDesjardins Security Fund
Fonds de sécurité DesjardinsDesjardins Security Fund
May 2014
First presented: June 2012
May 2014
First presented: June 2012
16
Presentation Agenda
What is the ‘‘Fonds de sécurité Desjardins’’?
History
Capitalization
Structure Regulatory Framework Administrative Structure
A Few Financial Statistics
Question Period
17
A Unique Organization within the Financial System
Exclusive to Desjardins Caisses in Québec ‘‘Caisse Life Insurance’’
A Collective Reserve for Caisses
Ex Ante / Ex Post Approaches
An Inalienable Asset Base
Security Fund vs Deposit Insurance
What Is the Desjardins Security Fund?
18
A Few Financial Statistics as at December 31, 2011
Net Value $757 million
Ratio of net fund value to caisses assets 0.60 %
Investments portofolio $774,5 million
19
Established by government
Protects depositors by reimbursing deposits ($100,000 max.) in case of bankruptcy of their financial institution
Seeks to limit losses by liquidating financial institutions
Maintains public confidence in the financial system
Established by FCDQ
Protects caisses against insolvency by subsidizing the deficit
Maintains financial institutions in operation whenever possible
Maintains public confidence in the Desjardins network of caisses
Deposit Insurance
Security Fund
Deposit Insurance vs Security Fund in Quebec
20
Involves direct governmental intervention either in the form of endorsement of or financial support
Protection limited to the government’s financial capacity
Net value of the deposit insurance fund managed by the Autorité des marchés financiers (AMF) : $478 million as at March 31, 2011
Avoids governmental intervention, allows more freedom of action by managers of the financial institution
Protection limited to the financial capacity of the security fund
Net value of the Desjardins Security Fund : $ 787 million as at June 30, 2012
Deposit Insurance
Security Fund
Deposit Insurance vs Security Fund in Quebec
21
Unity and dependability of the institution
Public confidence in the caisses
Network autonomy and management flexibility for Desjardins
Enhances financial and other problems solving capacity
Credibility of the caisses
Capital recognition of the Fund into overall network capitalization
Group credit rating
Tax issues
Lower premium paid to the Regulator (AMF) – premium paid in 2010: en 2010: $14,4 million en 2011: $15,1 million en 2012: $15,8 million
Benefits of a Security Fund
22
Mission
The mission of the Desjardins Security Fund is to create and administer a security, liquidity and mutual assistance fund for the benefit of member caisses, to be used for :
subsidizing the deficit of a member caisse whose reserves have been exhausted contributing to members’ compensation for their losses in the event of a caisse liquidation participating in the overall caisse network capitalization
23
Powers
Act respecting financial services cooperatives
set and require assessments or special fees from member caisses
make loans and grants to a caisse make a management agreement with a caisse acquire some or all of the assets of a caisse act as a provisional administrator, liquidator or
sequestrator of a caisse
24
Inspection visits
oversight fees paid to the Bureau de la Surveillance du Mouvement Desjardins
access to inspection report
Monitoring of caisses under greater financial stress
Participation in caisse network capitalization
Organization of last recourse
exhausted Fédération support
exhausted caisse reserves
payment of subsidies
management agreement recovery plan the caisse’s financial
progress follow-up
Preventive
Role
Curative
25
1949-1979 Appearance of the first security funds
1980-1985 Founding and start-up of an independent corporation : Corporation de fonds de sécurité de la Confédération Desjardins
1986-1995 Fund Growth
1996-… Fund Strengthening and Consolidation
History
26
1949-1979 Appearance of the first Security Funds
Year Number of
Caisses
Caisse Assets
($million)
Caisse Assessments
Subsidies paid
Net Value
Net value / Caisses assets
(bp)
Net value Objective
(bp) 1949
1 068 208 $16 000 -- $16 000 0.8 --
1979
1 258 10 016 $2.1million $1.9 million $4.2 million 4 --
27
1982• 496 out of 1 465 (1/3) caisses running deficits• Special, exceptional fees = 1/10 of 1% of caisse assets
1980-1985 Founding and start-up of an independent corporation
Year Number of
Caisses
Caisse Assets
($million)
Caisse Assessments
($million)
Subsidies paid
($million)
Number of Caisses
Subsidized
Net value
($million)
Net value / Caisse assets
(bp)
Net value Objective
(bp)
1980
1 372 11 655 1.3 4.2 90 1.2 0 50
1982
1 465 15 466 32.5 32.2 187 (7.4) (5) 50
1985
1 381 21 426 35.2 4.8 38 65.0 30 50
28
Grants paid to caisses
30,2 M$ - 30 caisses32,2 M$ - 187 caisses
0
5
10
15
20
25
30
35
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
millio
ns $
29
1986-1995 Development of the corporation
Year Number of
Caisses
Caisse Assets
($million)
Caisse Assessments
($million)
Subsidies paid
($million)
Number of Caisses
Subsidized
Net value ($million)
Net value / Caisse assets
(bp)
Net value Objective
(bp)
1986
1 371 23 891 34.1 2.7 16 92.4 38 50
1995
1 318 51 962 28.5 30.2 30 316.3 61 50
30
1996-... Fund Strengthening and Consolidation
YearNumber
of caisses
Caisse Assets
($million)
Caisse Assessment
($million)
Subsidies paid
($million)
Number of caisses
subsidized
Net Value ($mil-lion)
Net Value / caisses assets (p.b.)
Nette Value Objective
(p.b.)
1996 1 307 53 585 29,5 23,6 50 332,8 62 100
2011 402 127 025 40,3 0 0 757,1 60between 55 and
65
31
Capitalization has always been associated with the caisse network’s risks and has fluctuated over time.
2005 revision of Fund capitalization :
consulting with various national and international organizations
scientific study to determine adequate capitalization relative to risks
determination of optimal capital between 55 and 65 basis points in terms of caisses’ total assets
Net value as at December 31, 2011 : 0.60% ($757 million / $127 billion)
Capitalization
32
Net worth ratio (2000-2011)in % of caisses assets
0,50%
0,52%
0,54%
0,56%
0,58%
0,60%
0,62%
0,64%
0,66%
0,68%
0,70%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Années
% d
e l
'ac
tif
de
s c
ais
se
s
33
Regulatory Framework
Legal
Act respecting financial services cooperatives Regulation respecting
investments of a security fund
Act respecting the Autorité des marchés financiers
Deposit Insurance Act Income Tax Acts (federal
and provincial)
Internal
General By-laws
Code of Ethics and Professional conduct
Policies : assessment investment intervention
34
Assessment Policy
Guiding principles Mission of the Desjardins Security Fund Network Solidarity Equity Caisses capitalization Prevention
Three-fold consideration for annual assessmentsOnce yearly, at the beginning of July (7th month following
the caisses year-end (December 31))• 2008 Assessment
$24.9 million - $5.0 million rebate = $19.9 million• 2009 Assessment
$26.8 million - $5.3 million = $21.5 million• 2010 Assessment
$38.8 million - $7.7 million = $31.1 million• 2011 Assessment
$50.2 million - $9.9 million = $40.3 million
35
Guiding principlesSecurityLiquidityYield
Fund managersCaisse centrale Desjardins
Portfolio management structure 100% in bonds, mainly in federal and
provincial governments and financial institutions securities
Investment Policy
36
Investment portfolio management structure
2009.12 2011.12
Federal 29 % 25,5 %
Provincial 51 % 43,6 %
Municipal 5 % 13,2 %
Corporate AAA/AA 15 % 17,7 %
37
Guiding principlesMission of Desjardins Security FundGuarantee of member depositsCaisse solvencyNetwork SolidarityPreventionFund adequacy (assessment and investment policies)
Role and responsibility of intervening partiesCaisse subsidized and/or not having adequate
inexpensive capital FédérationBureau de la Surveillance du Mouvement Desjardins
Intervention Policy
38
Administrative Structure
Board of Directors
General Manager Support Officer
Outsourcing
Caisse centrale Desjardins
Fédération des caisses Desjardins du Québec
cash, accounting, legal and tax human ressources, economic and financial caisse monitoring, support and advice
fund management advisory services safekeeping reports financial statements
Question PeriodQuestion Period