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Report
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Clerk at 905-623-3379 ext. 2102.
Report To: General Government Committee
Date of Meeting: October 17, 2016
Report Number: FND-012-16 Resolution:
File Number: By-law Number:
Report Subject: Acceptance of Letters of Credit from Credit
Unions Recommendations:
1.That Report FND-012-16 be received; and
2.That letters of credit be accepted from Credit Unions provided that they comply with the
required terms established satisfactory to the Municipal Treasurer or Municipal Solicitor, as
listed below:
a)The Credit Union is a member of the Central 1 Credit Union;
b)The Central 1 rating from Dominion Bond Rating Service for medium and long term
senior notes and Deposits is A (High) or better and short term notes is R-1 (middle) or
better;
c)The Credit Union is listed on the annual and quarterly reports list for the largest 100
Credit Unions based on asset size issued by Canadian Credit Union Association; and
d)The developer or other company posting the letter of credit is responsible for supplying
(or arranging to supply) to Clarington documented proof of the Credit Union’s standing.
Municipality of Clarington
Report FND-012-16 Page 2
Report Overview
The purpose of this report is to update the Municipality of Clarington’s policy on Letters of
Credit to accept Letters of Credit from Credit Unions.
1. Background
1.1 In 1993, Council approved a Treasury report TR-3-93, for Credit Union Services that
restricted the credit unions from doing business with the Municipality in the following
areas: banking services, letters of credit and the Municipality’s investment policy. This
was established at the time based on differing financial risks and legal structure of Credit
Unions that have since been changed.
1.2 The Municipality of Clarington has been approached by a Credit Union to accept Letters
of Credit to improve customer service to Developers and Investors in the Municipality.
1.3 The Municipality of Clarington currently accepts letters of credit from Schedule 1 banks
under the Bank Act. Schedule 1 banks are Canadian owned and include the Royal Bank
of Canada, Toronto Dominion Bank, Scotiabank, Bank of Montreal, Canadian Imperial
Bank of Commerce, known as the Big Five Banks.
1.4 Credit Unions fall under the Schedule 2 bank category and are regulated by the Credit
Unions and Caisses Populaires Act, 1994. Credit unions are locally owned and invest
their profits in the communities where they operate; where their members live and work.
Credit unions are autonomous. Each one has its own brand identity, management and
Board of Directors and they are united through provincial centrals.
1.5 Central 1 provides liquidity management, payments, internet and trade association
services to its member credit unions in British Columbia and Ontario. Member credit
unions of Central 1 are required to enter into a Liquidity Agreement and under this
agreement the member credit unions must maintain deposits with Central 1 of at least 6%
of assets.
1.6 Central 1’s liquidity management is designed to ensure that reliable and cost effective
funding sources are available to satisfy current and prospective commitments of Central 1
and its member credit unions. The liquidity management main component is the
maintenance of unencumbered high quality liquid securities that can readily be converted
to cash.
1.7 Credit unions that are not members of the Central 1 are required to adhere to a “prudent
person” approach to maintaining adequate liquidity.
Municipality of Clarington
Report FND-012-16 Page 3
2. Additional Comments
2.1 A survey was done of various lower and upper tier municipalities to see if they accepted
letters of credit from Credit Unions for building and planning purposes. Please see below
chart for survey results.
Municipality Name Accept Letters of Credit from Credit Unions
Yes No
Town of Fort Erie X
City of Niagara Falls X
City of St. Catherines X
Towns of Blue Mountain X
Regional Municipality of Peel X
Regional Municipality of York X
Town of Newmarket X
Town of Richmond Hill X
City of Toronto X
City of Markham X
City of Pickering X
Town of Ajax X
Town of Whitby X
City of Oshawa (1) X
Regional Municipality of Durham X
Note (1) Depending on the project and concurrence of the solicitor and the related department
head, the City of Oshawa accepts letters of credit from Credit Unions.
2.2 In August 2016, the Municipality accepted letters of credit from Meridian Credit Union
based on requests by a major developer, upon consultation with the Director of
Finance/Treasurer and the Solicitor.
3. Concurrence
This report has been reviewed by Andrew Allison, Solicitor, who concurs with the
recommendations.
Municipality of Clarington
Report FND-012-16 Page 4
4. Conclusion
It is respectfully recommended that letters of credit be accepted from Credit Unions providing
the following conditions are met:
a) The Credit Union is a member of the Central 1 Credit Union;
b) The Central 1 rating from Dominion Bond Rating Service for medium and long term
senior notes and Deposits is A (High) or better and short term notes is R-1 (middle) or
better (current rating attached);
c) The Credit Union is listed on the annual and quarterly reports list for the largest 100
Credit Unions based on asset size issued by Canadian Credit Union Association; and
d) The developer or other company posting the letter of credit is responsible for supplying
(or arranging to supply) to Clarington documented proof of the Credit Union’s standing.
A current listing of the largest 100 is attached for Council’s information.
5. Strategic Plan Application
The recommendations contained in this report conform to the Strategic Plan.
Submitted by: Reviewed by:
Nancy Taylor, BA, CA, CPA, Curry Clifford, MPA, CMO
Director of Finance/Treasurer Interim CAO
Staff Contact: Lori Gordon, Deputy Treasurer, 905-623-3379 ext. 2604 or
lgordon@clarington.net
There are no interested parties to be notified of Council’s decision.
NT/LG/hjl
Attachments:
Attachment #1 – Largest 100 Credit Unions
Attachment #2 – DBRS Central 1 Rating