Regulations and Credit Unions: Ensuring Compliance in a Complex Environment

A complex regulatory environment seems to go hand in hand with financial institutions no matter their size. A myriad of provincial and federal rules and accounting standards exist to ensure consumers are fully informed and protected and institutions such as credit unions are accountable.

There’s no argument regulations are required to instill investor confidence and ensure financial stability. Transparent disclosure provides the information credit union members need to understand the financial and operational risks within their member-owned institutions, however, where does transparency end and information overload begin? It is tough to balance the mass of regulatory requirements and ensure practical application of these requirements to enable credit unions to be both compliant and provide transparency for members.

For example, under the new International Financial Reporting Standard 9 (IFRS 9), credit unions must now estimate and account for all future expected credit losses from when they first lend money. They are then expected to adjust their loan loss calculations immediately if they expect a loan’s credit condition to decline over it’s lifetime.

However, loans are granted on an individual, case-by-case basis but the measurement of risk will be defined by factors such as geography and macroeconomic forces not necessarily directly correlated to the borrower’s ability to repay their loan. So, how does the credit union present the information to its members without creating more uncertainty and judgment on the practical application of compliance?

Working with a professional accounting firm such as MNP can help credit unions better understand technical accounting requirements and pass this information along to members – allowing them to find relevant and clear information more easily. Both the external audit and internal audit processes are designed to help credit unions manage risk and ensure both management and the board have relevant information on compliance with regulations. For internal audit, it is about establishing and maintaining an effective system of internal controls to improve reliability of financial reporting and support compliance with applicable laws and regulations. This includes having a mechanism in place that provides independent assurance your internal control systems are mitigating risk and highlighting opportunities to improve operations and optimize performance. From an external audit perspective, MNP’s focus is both on the financial information reported to members and other key stakeholders in the financial statements as well as the value-added recommendations as we work with your team throughout the year.

Find out more as MNP’s Jas Chahal, CPA, CA, discusses credit unions and regulatory burdens in an insightful two-minute video.

MNP has extensive experience providing accounting and business consulting services to more than 100 credit unions across Canada. Our dedicated credit union team delivers service specifically designed to help credit unions achieve their goals by providing strategic advice in assurance, taxation, enterprise risk management, corporate governance, consulting, investigative and forensic accounting and more.

Contact Jas Chahal, Partner, Assurance and Advisory, for more information at 905.333.9888 or [email protected].