Submission calls for co-operative banks to sell insurance

As the federal government looks at submissions on the possibility of establishing co-operative banks nationally, at least one credit union is calling for these institutions to be allowed to sell insurance.Banks are banned from selling insurance through their branches through Bill C-8, but credit unions in certain provinces are allowed to do so.The submission, from CS Co-op Community Financial Services in Ontario to the Finance Ministry, says that co-operative banks would provide more competition in the financial services arena, and greater choice for consumers. “We believe that an enhanced co-operative movement could play a key role in strengthening the second tier of institutions in Canada and, in doing so, foster greater competition in our financial services sector.”Co-operative banks are owned by their members and do not sell shares to the general public, thus need to generate capital internally. For this reason, CS Co-op argues, co-operative banks need enhanced business powers beyond what is available to the large banks. Citing the 1998 Mackay Task Force, CS Co-op notes that it is recommended banks be allowed to retail insurance, but that smaller banks be given an “early start” in offering new products and services, such as insurance and auto lease financing, over the big banks. The submission also calls for a different tax structure for co-operative banks, treating them as small business, such as is done with credit unions. This “small business” rate is needed to offset the inability of co-operative banks to access capital markets, CS Co-op argues.The Finance Ministry is accepting submissions on the proposal to create a federal co-operative banking system until early October.