Credit Management Policy Checklist



|Review Checklist |

|Part A – Liquidity Policy Legislative Requirements |

|Has the credit union established liquidity policies for the credit union? The Act S. 85 (1) |Yes |No |NA |

|Does the Liquidity Policy consist of policies, standards, and procedures that a reasonable person and prudent |Yes |No |NA |

|person would apply in order to ensure the financial soundness of the credit union, avoid undue risk of loss and| | | |

|obtain a reasonable return? The Act S. 85 (2) | | | |

|Does the board conduct a review of the policies at least once each year? The Act S. 85 (3) |Yes |No |NA |

|There are no orders made by the Corporation to amend policies that are considered to be inadequate or |Yes |No |NA |

|imprudent? The Act S. 85 (4) | | | |

| | | | |

|If “No”, state the order: | | | |

|Is the order being carried out? |Yes |No |NA |

|There are no variances approved by the Corporation? |Yes |No |NA |

| | | | |

|If “No”, describe the variance: | | | |

|Part B – Adequate Liquidity for a Class 1 Credit Union |

|Does the credit union maintain eligible assets for adequate liquidity whose value is at least 7% of the total |Yes |No |NA |

|deposits and borrowings of the credit union? O. Reg. 237/09, s. 20(2) If less than 7%, proceed to next | | | |

|question. | | | |

|If the credit union maintains a minimum of 5% or more does it meets all of the following criteria? O. Reg. 237/09, s. 20(3) |

|It has a line of credit with a financial institution, Credit Union Central of Canada, Central 1 Credit Union, |Yes |No |NA |

|La Fédération des caisses Desjardins du Québec or La Caisse central Desjardins du Québec? | | | |

|The line of credit is for an amount that is equal to or more than 2% of the credit union’s deposits. |Yes |No |NA |

|The line of credit is revocable only after at least 30 days notice to the credit union. |Yes |No |NA |

|The terms of the line of credit are set out in writing. |Yes |No |NA |

|Does the credit union include any other assets other than the following in its liquidity calculations? O. Reg.|Yes |No |NA |

|237/09, s. 20(4) If “YES”, please describe the assets. | | | |

|Cash |Yes |No |NA |

|A deposit that matures in 100 days or less that is with, | | | |

|A bank or authorized foreign bank within the meaning of Section 2 of the Bank Act (Canada) | | | |

|A corporation registered under the Loan and Trust Corporations Act | | | |

|A league, Central 1 Credit Union, La Fédération des caisses Desjardins du Québec or La Caisse central | | | |

|Desjardins du Québec, or | | | |

|Credit Union Central of Canada | | | |

|A treasury bill or other debt obligation issued by the Government of Canada or a province that matures in 100 | | | |

|days or less. | | | |

|A banker’s acceptance or discounted note issued by a bank or authorized foreign bank within the meaning of | | | |

|section 2 of the Bank Act (Canada), a league, Central 1 Credit Union, La Fédération des caisses Desjardins du | | | |

|Québec or La Caisse central Desjardins du Québec, or Credit Union Central of Canada, if | | | |

|the acceptance matures in one year or less, and | | | |

|the acceptance or note has a rating of at least A (low), as classified by the Dominion Bond Rating Service or | | | |

|an equivalent rating as set out in the Capital Adequacy Guideline for Ontario’s Credit Unions and Caisses | | | |

|Populaires. | | | |

|A debt obligation of a league, Central 1 Credit Union, La Fédération des caisses Desjardins du Québec or La | | | |

|Caisse central Desjardins du Québec, or Credit Union Central of Canada that matures in 100 days or less. | | | |

|A debt obligation of the Corporation. | | | |

| | | | |

|Other Assets claimed for eligibility: | | | |

| | | | |

| | | | |

|NOTE: If an employer has deducted an amount from the pay of a member to be remitted to the credit union and the credit union has credited the|

|amount to the member’s account but has not yet received the amount from the employer, an amount equal to that is in the process of being |

|remitted to the credit union shall be deemed to be an eligible asset for adequate liquidity. O. Reg. 237/09, s. 20 (5) |

|No encumbered assets have been used to satisfy the requirements for adequate liquidity unless the asset was |Yes |No |NA |

|encumbered only by a security interest in favour of the Corporation? O. Reg. 237/09, S. 22 | | | |

|Part C – Adequate Liquidity for a Class 2 Credit Union |

|Has the credit union established prudent limits and forms of liquidity that are sufficient to meet its cash |Yes |No |NA |

|flow needs, including depositor withdrawals and all other obligations as they come due? O. Reg. 237/09, S. 21 | | | |

|(2) | | | |

|Does the Liquidity Policy establish what assets shall be used to satisfy the requirements for adequate |Yes |No |NA |

|liquidity? O. Reg. 237/09, S. 21 (3) | | | |

|Is liquidity within policy guidelines? |Yes |No |NA |

|The credit union is not using an asset that is not established in the Liquidity Policy to satisfy requirements |Yes |No |NA |

|for adequate liquidity? | | | |

| | | | |

|If “No”, please explain: | | | |

|There are no encumbered assets that have been used to satisfy the requirements for adequate liquidity unless |Yes |No |NA |

|the asset was encumbered only by a security interest in favour of the Corporation? O. Reg. 237/09, S. 22 | | | |

|Part D – Liquidity Risk Management Policy General |

|Does the policy address the following? |

|Measuring, monitoring and reporting on liquidity risk position exposure (including concentration of large |Yes |No |NA |

|deposits, borrowing for liquidity purposes) | | | |

|Minimum operating liquidity targets |Yes |No |NA |

|Limits to deposit liability concentration risk with respect to: |Yes |No |NA |

|An individual person and connected persons | | | |

|Brokered deposits | | | |

|Currency of deposits | | | |

|Delegation of authority and proper segregation of duties for managing liquidity risk |Yes |No |NA |

|Does the staff that is responsible for Liquidity Management have the skills, expertise, and training needed to |Yes |No |NA |

|implement the risk management policies, procedures, and controls? | | | |

|If “No”, does the credit union outsource Liquidity Management functions to a third party expert? |Yes |No |NA |

|Delegation of authority for operational borrowing |Yes |No |NA |

|Sources and acceptable ranges of operational liquidity |Yes |No |NA |

|Quality of assets used for liquidity purposes |Yes |No |NA |

|Maximum limits on liquidity borrowings |Yes |No |NA |

|Maturity Matching and/or Hedging of Large Deposits |Yes |No |NA |

|Frequency, form, and content of board reporting including the following: |

|Appropriately identifies the liquidity position of the institution |Yes |No |NA |

|Meets the requirements of the credit union’s liquidity risk management policies, the Act, and the Regulations |Yes |No |NA |

|Provides the board with sufficient and accurate information to determine that the institution is adhering to its liquidity risk management |

|policies including information on: |

|An operational funding deficit as a percentage of eligible assets and total deposits |Yes |No |NA |

|The market conditions surrounding the eligible assets and total deposits |Yes |No |NA |

|Concentration of large deposits of single and/or connected depositors and brokered deposits as a percentage of |Yes |No |NA |

|total deposits | | | |

|The level of any borrowings relative to available borrowing levels |Yes |No |NA |

|The amount and composition of any encumbered asset |Yes |No |NA |

|Corrective action to be taken should liquidity levels drop below the required minimum levels |Yes |NO |NA |

| | | | |

|Involvement in any securitization programs, if applicable |Yes |No |NA |

|If applicable, the securitization program should outline an approved list of counter parties |Yes |No |NA |

|Part E – Liquidity Risk Management Policy General Guidelines – Class 2 Credit Unions |

|Does the policy require assets held for liquidity should consist of cash and high quality securities for which |Yes |No |NA |

|there is a broad and active secondary market where these assets can be quickly liquidated? | | | |

|Does the policy address holding assets that may incur a substantial discount if quickly redeemed? |Yes |No |NA |

|Is all cash held for liquidity in the possession of, owned by and under the direct control of the credit union?|Yes |No |NA |

|Does the policy consider the existence of impediments what would prevent a quick sale to meet unanticipated net|Yes |No |NA |

|cash outflow requirements? | | | |

|Does the policy address that the use of encumbered assets used to meet liquidity needs is prohibited? |Yes |No |NA |

|Does the policy define what the credit union considers to be a large deposit, one that if withdrawn, would have|Yes |No |NA |

|a significant impact on operational liquidity? | | | |

|Does the policy require adequate monitoring of liquidity at least monthly using projections for the next three |Yes |No |NA |

|month period? | | | |

|In order to meet funding requirements, has the credit union engaged in construction of a maturity ladder to |Yes |No |NA |

|calculate the cumulative excess or shortfall of funds at selected maturity dates? | | | |

|Does the credit union complete scenario testing on the behaviour of cash flows when evaluating whether the |Yes |No |NA |

|credit union is sufficiently liquid? | | | |

|Part F – Debt Obligations (The Act Sections 183 -188) |

|Does the credit union have a by-law authorizing the credit union to borrow money at such rates of interest and |Yes |No |NA |

|on such conditions as the board may determine? | | | |

|The Act S. 183 (1) and S. 183 (2). | | | |

|Is the authorized amount of borrowing established in the by-laws equal to or less than the aggregate amount of |Yes |No |NA |

|50% of the credit union’s regulatory capital and deposits? The Act S. 183 (3) | | | |

| | | | |

|If “NO”, what is the aggregate authorized amount? | | | |

|The credit union has not created a security interest in property of the credit union? The Act S. 184 |Yes |No |NA |

|If “No”, does the security interest meet the circumstances prescribed in O. Reg. 237/09, S. 48? |Yes |No |NA |

|In the case of an acquisition, has the Corporation been notified that the credit union has acquired a security |Yes |No |NA |

|interest? The Act S. 185 | | | |

|The credit union has not borrowed money from another credit union? The Act S. 188 |Yes |No |NA |

|If “No” to above, was it approved by the Corporation? |Yes |No |NA |

|Part G – Managing Liquidity |

|Is borrowing used to meet short term liquidity needs or to fund long term growth? |Yes |No |NA |

|Is there a history of borrowing patterns? |Yes |No |NA |

|Is liquidity below 10%? If “YES”, please explain: |Yes |No |NA |

| | | | |

|If so, was historical borrowing patterns material? |Yes |No |NA |

|Is the credit union permitted to be involved in third party ATMs schemes? |Yes |No |NA |

|Has information regarding the line of credit (how much and where) been obtained? |Yes |No |NA |

|Are there borrowings when liquidity is high? |Yes |No |NA |

|Are there are any material discrepancies in levels reported to the Board and to DICO? |Yes |No |NA |

|Is liquidity unusually high? |Yes |No |NA |

|If so, what are the major contributory factors? | |

|i.e. lack of loan demand, high rates on deposits | |

| Is there a process to monitor large deposits? |Yes |No |NA |

|There are not significant un-extended lines- of- credit that, if used, would affect liquidity. |Yes |No |NA |

|Are all investments used for liquidity purposes easily redeemable? |Yes |No |NA |

|The credit union is not involved in third party ATMs? |Yes |No |NA |

|The credit union is not involved in any securitization programs? |Yes |No |NA |

|If “No”, what is the total amount of the securitization? |Yes |No |NA |

|Part H – Failure to Meet Requirements for Adequate Liquidity |

|Has the credit union met the requirements for adequate liquidity under section 84 of the Act? If “No”, |Yes |No |NA |

|complete next 3 questions. | | | |

|The credit union has not made any loan or any investment while it was not in compliance with the requirements |Yes |No |NA |

|for adequate liquidity? | | | |

|Has the credit union immediately submitted a report addressing the following matters to the Superintendent and |Yes |No |NA |

|to the Corporation? | | | |

| | | | |

|the circumstances that led to the failure to meet the requirements for adequate liquidity | | | |

|the steps the credit union has taken to meet the requirements for adequate liquidity, and | | | |

|when the credit union will again meet the requirements for adequate liquidity | | | |

| | | | |

|Date Report was Submitted: | | | |

|The credit union has not changed the terms and conditions of a loan or refinanced a loan while it has not met |Yes |No |NA |

|the requirements for adequate liquidity? | | | |

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