British Columbia is set to get a new Crown agency that will oversee financial services and regulate the likes of credit unions, mortgage brokers, pension fund managers and trust companies.
Legislation tabled Thursday by Minister of Finance Carole James will establish the B.C. Financial Services Authority (FSA), which will replace the Financial Institutions Commission (FICOM).
The change is a result of deficiencies in FICOM found by the Office of the Auditor General of B.C. in 2014 as well as an independent recommendation in 2017.
As a Crown agency, financial services will be regulated in a more transparent and independent fashion, according to the government.
FSA will be at arm’s length to the ministry, which will still appoint FSA’s board of directors. As well, the ministry will provide an annual mandate letter to FSA. The board will be responsible for appointing a CEO. FICOM’s current CEO is Tara Richards, and it’s understood a new appointment process will be in place for FSA.
The FSA will be responsible for its own annual reports and may be given rule-making powers.
FICOM’s existing mandate is to ensure credit unions and pension plans remain solvent; credit union deposits and non-equity shares are insured; market conduct requirements are respected; and “unsuitable individuals” do not participate in the financial services sector.
Previously, FICOM fell under the direct auspices of the Ministry of Finance. One glaring problem found by the auditor general was significant vacancy in staff positions because salaries were capped under government rules. The auditor general found 35% of positions were vacant. The commission now reports only 15% of positions are vacant.
As well, the ministry directly oversees FICOM’s budget, funded by industry fees, and any excess funds were returned to the ministry at year end. Now, FSA will be able to set its own parameters and keep excess funds to apply to regulation costs.
The auditor general also found existing legislation failed to keep up with international industry standards.
Government will also still have the power to alter the two key pieces of legislation that FSA will abide by: the Financial Institutions Act and the Credit Union Incorporation Act. These two acts are undergoing a review since 2015 and could provide for rule-making powers under the umbrella of legislation. Those reviews should take place every 10 years. The last reviews were conducted in 2004.
As one recent example of what FICOM does, it announced a voluntary compliance agreement with Travelers Insurance Company of Canada to ensure home warranty insurance products are being sold according to the Homeowner Protection Act and other regulations.
This followed FICOM’s findings that some insurers were passing the buck on claims against their warranties.
“FICOM regularly receives questions and complaints around home warranty insurance,” said Chris Carter, deputy superintendent of market conduct at FICOM.
FICOM is said to be on an industry awareness campaign with BC Housing, which regulates home builders who are required to carry third-party home warranty insurance.