TORONTO–Ontario’s credit have been given the OK to take part in group loans that are being offered by banks. The change comes as the result of changes made as part of Premier Doug Ford’s push to ensure the province is “open for business,” according to the Financial Post.
The Ontario government said in December that the province would amend its existing rules to let credit unions participate in bank-led syndicated loans, in which a group of lenders team up to provide money to a borrower, the Post said.
The Ontario government said the move — which was tucked into a broader package of proposals to cut red tape — will mean more financing options for businesses, according to the Post. “It will also help credit unions to better compete in commercial lending, the province says, by allowing them to offer bigger loans to their members,” the report added.
“In addition, the amendment enables credit unions to more effectively manage their risk by diversifying their lending portfolios,” a spokesperson for Ontario’s Ministry of Finance said in an email to the Post. “This change provides necessary clarity and reduces red tape for credit unions and banks to improve liquidity for Ontario capital markets and consumers.”
‘At a Disadvantage’
Previously, Ontario credit unions had been allowed to participate in loan syndications led by their fellow provincially regulated credit unions, but not by federally regulated banks or credit unions, according to the Financial Post.
Until the change, Ontario had been the only province in Canada with the restriction.
Martha Durdin, president and CEO of the Canadian Credit Union Association was quoted as saying, “It put Ontario credit unions at a disadvantage. Because of the relative size (of credit unions), participating in syndications rather than leading them is (an) attractive tool for them, so that they can pursue larger clients.”
The Deposit Insurance Corporation of Ontario, which regulates credit unions, issued an advisory in August 2018 that laid out the restrictions around syndicated loans. The change applies to the nearly 80 credit unions and caisses populaires in Ontario, which have around 1.6 million members and more than $63 billion in assets.