DBRS Morningstar Comments on Innovation Credit Union’s Federal Continuance

DBRS Limited (DBRS Morningstar) notes that its ratings for Innovation Credit Union (Innovation or the Credit Union), including the Short-Term Issuer Rating and Short-Term Instruments rating of R-1 (low), both with Stable trends, are unaffected following the Credit Union receiving federal continuance effective June 23, 2023. As part of the change in charter, Innovation’s legal name is now Innovation Federal Credit Union.

Innovation now falls under the supervision of the Office of the Superintendent of Financial Institutions and will be regulated under the Bank Act. As the Credit Union is no longer provincially regulated, Innovation’s Support Assessment (SA) was changed to SA3 from SA2, reflecting our view that the Credit Union can no longer expect timely systemic external support from the Province of Saskatchewan (Saskatchewan or the Province; rated AA (low)/R-1 (middle) with Stable trends by DBRS Morningstar) through Credit Union Central of Saskatchewan (rated R-1 (low) with a Stable trend by DBRS Morningstar), particularly in the form of liquidity. Nonetheless, as a federally regulated financial institution, the Credit Union now has potential to access the Bank of Canada’s (BOC) Emergency Lending Assistance without needing to meet the additional requirements of provincially regulated deposit-taking institutions (i.e., provincial indemnity and importance to stability of the broader financial system), subject to BOC terms and conditions at time of any application request for funding. As a deposit-taking institution with access to a government central bank, Innovation will continue to positively benefit from the short-term rating exception resulting in no change to Innovation’s short-term ratings despite the SA3 designation.

Innovation is Saskatchewan’s third-largest credit union by assets and is the third Canadian credit union to achieve federal continuance. The federal charter will enable Innovation to promote its products and services across Canada, but DBRS Morningstar notes the Credit Union will serve members outside of Saskatchewan via mobile and online banking and does not plan to build new branches outside the Province.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com.

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