Corporate

Corporate reports

As a wholly-owned subsidiary of Vancity Credit Union , our annual reports are rolled up into the corporate reporting of our parent company.

Learn more about Vancity, its performance, and where Vancity Community Investment Bank fits in to the bigger picture, through the annual reports on the Vancity website.

Regulatory Disclosures

1. Overview

Vancity Community Investment Bank (VCIB) is a federally regulated Schedule 1 bank under the Bank Act (Canada) and is regulated by the Office of the Superintendent of Financial Institutions Canada (OSFI).  VCIB offers commercial banking services and products including deposits.

VCIB is a wholly-owned subsidiary of Vancity Credit Union. VCIB annual reports are consolidated with those of Vancity. Information about Vancity, its performance are available through the annual reports on the Vancity website

Regulatory Disclosures below are in accordance with OSFI regulatory requirements and are based on the Basel Committee of Banking Supervision Pillar 3 disclosure requirements.  Disclosures are based on Bank’s financial statements as at December 31, 2019.

2:  Capital adequacy

The objective of managing capital at the Bank is to ensure safety and soundness of the organization while supporting VCIB’s ongoing operations.  Capital Adequacy ensures that VCIB has sufficient regulatory capital to meet minimum regulatory requirements, to support its business strategy and protect it against unexpected losses.  To mitigate the risk of unexpected losses, VCIB calculates its capital base as a percentage of the risk weighted assets and ensures minimum OSFI targets are not breached. In addition, The Bank uses the annual Board of Directors approved Capital Management Policy to manage Regulatory Capital Risk.

The Asset and Liability Committee (ALCO) monitors compliance with the policy on a regular basis, and the Board of Directors reviews compliance with the policy on a quarterly basis.

The Asset and Liability Committee (ALCO) monitors compliance with the policy on a regular basis, and the Board of Directors reviews compliance with the policy on a quarterly basis.

VCIB manages its capital under guidelines established by OSFI and follows an Internal Capital Adequacy Assessment process (ICAAP) submitted to OSFI for review annually.  Multiple stress tests are integrated into the capital planning process to determine capital requirements.  Stress testing quantifies possible events or future changes in economic conditions that could have unfavorable effects on VCIB’s exposures. As a result of stress testing, management is informed about potential risks and their impact and considers these risks in capital planning and risk management practices.

The table below provides the composition of capital disclosures under Basel III as required by OSFI as at Dec 31, 2019:

Quantitative Disclosures:   12/31/2019 12/31/2018
Modified Capital Disclosure Template All-in All-in

Common Equity Tier 1 Capital: instruments and reserves

1 Directly issued qualifying common share capital (and equivalent for non-joint stock companies) plus related stock surplus 50,464,000 20,464,000
2 Retained earnings 8,135,000 12,808,000
3 Accumulated other comprehensive income (and other reserves) 399,000 551,000
4 Directly issued capital subject to phase out from CET1 (only applicable to non-joint stock companies)  0  0
5 Common share capital issued by subsidiaries and held by third parties (amount allowed in group CET1)  0  0
6 Common Equity Tier 1 capital before regulatory adjustments 58,998,000 33,823,000

 Common Equity Tier 1 capital: regulatory adjustments

28 Total regulatory adjustments to Common Equity Tier 1 -3,497,000 -235,000
29 Common Equity Tier 1 capital (CET1) 55,501,000 33,588,000

 Additional Tier 1 capital: instruments

30 Directly issued qualifying Additional Tier 1 instruments plus related surplus  0  0
31 of which: classified as equity under applicable accounting standards  0  0
32 of which: classified as liabilities under applicable accounting standards  0  0
33 Directly issued capital instruments subject to phase out from additional Tier 1  0  0
34 Additional Tier 1 instruments (CET1 instruments not included in row 5) issued by subsidiaries and held by third parties (amount allowed in group AT1)  0  0
35 of which: instruments issued by subsidiaries subject to phase out  0  0
36 Additional Tier 1 capital before regulatory adjustments  0  0

 Additional Tier 1 capital: regulatory adjustments

43 Total regulatory adjustments to Additional Tier 1 capital  0  0
44 Additional Tier 1 capital (AT1)  0  0
45 Tier 1 Capital (T1 = CET1 + AT1) 55,501,000 33,588,000

 Tier 2 capital: instruments and allowances

46 Directly issued qualifying Tier 2 instruments plus related stock surplus  0  0
47 Directly issued capital instruments subject to phase out from Tier 2  0  0
48 Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34 ) issued by subsidiaries and held by third parties (amount allowed in group Tier 2)  0  0
49 of which: instruments issued by subsidiaries subject to phase out  0  0
50 Collective allowances  0  0
51 Tier 2 capital before regulatory adjustments  0  0

 Tier 2 Capital: regulatory adjustments

57 Total Regulatory adjustments to Tier 2 capital  0  0
58 Tier 2 capital (T2)  0  0
59 Total capital (TC = T1 + T2) 55,501,000 33,588,000
60* Total risk-weighted assets 114,204,000 81,294,000

Capital ratios

61 Common Equity Tier 1 (as percentage of risk-weighted assets) 48.60 41.32
62 Tier 1 (as percentage of risk-weighted assets) 48.60 41.32
63 Total capital (as percentage of risk weighted assets) 48.60 41.32
 
69 Common Equity Tier 1 capital all-in target ratio 7 7
70 Tier 1 capital all-in target 8.5 8.5
71 Total capital all-in target ratio 10.5 10.5

3:  Leverage Ratio

Leverage ratio measures the bank’s tier 1 capital relative to total assets. This ratio looks at tier 1 capital to judge how leveraged the bank is based on its assets. Tier 1 capital consists of assets that can be easily liquidated if the bank needs capital.

The following table summarizes Bank’s Basel III Pillar 3 Leverage Ratio as at December 31, 2019

Quantitative Disclosures:  Item Leverage Ratio Framework (in $000’s) Leverage Ratio Framework (in $000’s)
 12/31/2019  12/31/2018

 On-balance sheet exposures

   1.00 On-balance sheet items (excluding derivatives, SFTs and grandfathered securitization exposures but including collateral) 141,562 103,653
   2.00 (Asset amounts deducted in determining Basel III “all-in” Tier 1 capital) -3,497 -235
   3.00 Total on-balance sheet exposures (excluding derivatives and SFTs) (sum of lines 1 and 2) 138,065        103,418

 Derivative exposures

   4.00 Replacement cost associated with all derivative transactions (i.e. net of eligible cash variation margin) 809.2                  1,281
   5.00 Add-on amounts for PFE associated with all derivative transactions            1,408                   1,073
   6.00 Gross up for derivatives collateral provided where deducted from the balance sheet assets pursuant to the operative accounting framework  0  0
   7.00 (Deductions of receivables assets for cash variation margin provided in derivative transactions)  0  0
   8.00 (Exempted CCP-leg of client cleared trade exposures)  0  0
   9.00 Adjusted effective notional amount of written credit derivatives  0  0
 10.00 (Adjusted effective notional offsets and add-on deductions for written credit derivatives)  0  0
 11.00 Total derivative exposures (sum of lines 4 to 10) 2,218 2,354

 Securities financing transaction exposures

 12.00 Gross SFT assets recognized for accounting purposes (with no recognition of netting), after adjusting for sale accounting transactions  0  0
 13.00 (Netted amounts of cash payables and cash receivables of gross SFT assets)  0  0
 14.00 Counterparty credit risk (CCR) exposure for SFTs  0  0
 15.00 Agent transaction exposures  0  0
 16.00 Total securities financing transaction exposures (sum of lines 12 to 15)  0  0

 Other off-balance sheet exposures

 17.00 Off-balance sheet exposure at gross notional amount 25,676 30,565
 18.00 (Adjustments for conversion to credit equivalent amounts) -23,108 -27,437
 19.00 Off-balance sheet items (sum of lines 17 and 18) 2,568 3,128

 Capital and Total Exposures

 20.00 Tier 1 capital 55,501 33,588
 21.00 Total Exposures (sum of lines 3, 11, 16 and 19) 142,850 108,900

Leverage Ratios

22 Basel III leverage ratio 38.85 30.84

4:  Credit Risk

VCIB defines Credit Risk as the risk of financial loss to VCIB if a customer or counterparty to a financial transaction fails to meet its contractual obligations. Credit risk arises primarily from VCIB’s loans and advances to customers. VCIB is also exposed to other credit risks arising from investments in debt securities and other exposures arising from its investment activities, including non-equity investment portfolio assets, derivatives and settlement balances with market counterparties.

VCIB’s credit philosophy is based on the view that our fundamental responsibility is to consider first and foremost the safety of the bank while being mindful that providing community impact borrowers with effective borrowing opportunities is a core business activity.  VCIB manages, limits and controls concentrations of credit risk, where identified, to individual counterparties.

VCIB’s Lending Policy establishes the approach of the Bank to lending and applies to its lending activities. All of the Bank’s lending activities must be conducted according to the requirements and limits set out within the Lending Policy.  The Lending Policy is reviewed annually by the Board.

Impairment of financial assets

VCIB uses an expected credit loss (ECL) model which applies to amortized cost financial assets, debt investments at fair value through other comprehensive income, off-balance sheet loan commitments, and financial guarantee contracts.

Loss allowances are measured on either of the following bases:

  • 12-month ECL: these are losses that result from possible default events within the 12 months after the reporting date; and
  • Lifetime ECL: these are losses that result from all possible default events over the expected life of a financial instrument.

ECL is measured as 12-month ECL unless the credit risk on a financial instrument has increased significantly since initial recognition, the instrument is credit-impaired at initial recognition, or trade and lease receivable, for which VCIB has elected to use lifetime ECL to measure the loss allowance.

The assessment of significant increase in credit risk considers information about past events and current conditions as well as reasonable and supportable forecasts of future events and economic conditions. Factors considered in the assessment include macroeconomic outlook, delinquency and monitoring.

Quantitative Credit Disclosures

A breakdown of VCIB’s loan portfolio by loan type, its credit risk weighted assets, and impaired loans are published by OSFI and are available through the following hyperlink:
Financial Data – Banks

5:  Liquidity risk

VCIB defines Liquidity Risk as the inability to generate or obtain necessary cash or equivalents in a timely manner and at a reasonable price to meet commitments or regulatory requirements.

The Liquidity Policy outlines risk measures and monitoring activities and establishes accountabilities. On an annual basis, the Board, through the Audit Committee, reviews and approves the Liquidity Policy.  The Asset Liability Committee, a management committee, oversees the operational adherence to the Liquidity Policy and approves liquidity management processes and strategies in addition to overseeing adherence to minimum liquidity limits, eligibility requirements for liquid assets, investments with counterparties, funding diversification, deposit concentration and diversification limits.

Stress testing on liquidity is conducted annually as part of VCIB’s risk oversight and the results inform and ensure adequate liquidity risk limits are in place and current.

Contingency plans exist for liquidity to satisfy funding requirements in the case of a general market disruption or adverse economic conditions.  Proper execution of the contingency plan is the responsibility of the Chief Financial Officer. The liquidity contingency plan outlines the appropriate steps to follow and stakeholders to notify. It is scenario tested annually, and the results are presented to the Board.

The two key measures used by VCIB for managing liquidity risk are the ratio of liquid assets to total assets and Liquidity Coverage Ratio (LCR). LCR is a Basel III liquidity measure designed to assess an organization’s ability to withstand a 30 day funding disruption, based on its reserve of high quality liquid assets. For the purpose of measuring liquidity risk, liquid assets may comprise the total market value of cash, Government of Canada or provincial treasury bills, debt securities with a government guarantee and a minimum Dominion Bond Rating Services (“DBRS”) investment rating of A, government guaranteed mortgage backed securities, banker’s acceptances and bearer deposit notes from Schedule I and II banks with a DBRS rating of R-1 low or higher, and corporate commercial paper with a DBRS rating of R-1 low or higher.

6:  Operation Risk

VCIB defines Operational Risk as the risk of loss resulting from regulatory non-compliance  and impacts that are detrimental to our customers resulting from people, inadequate or failed internal processes and systems, or from external events such as external fraud or cyber crime.

The Operational Risk Management Framework outlines operational risk management  actions, tools and establishes accountabilities for managing risk consistent with the Three Lines of Defense model.

The Board of Directors receives reports and other operational risk information from management on a quarterly basis.  The Risk Management Committee is a management committee responsible for establishing an organization wide operational risk management program integrated with  Enterprise Risk Management and the Risk Appetite.  Management is accountable for developing the appropriate strategies, policies, and tools to identify, assess, measure, monitor, manage and report operational risk.

7. Remuneration

Oversight and governance of the remuneration policies and compensation structure for VCIB’s  senior management is provided by the Governance & Executive Compensation Committee (“GECC”) of the Board, which meets quarterly.   There are four members on the GECC.  Directors are provided an honorarium, however, directors that are executive members of the Bank or the parent company, Vancity, are not compensated.  Total remuneration paid to directors in 2019 was $75,190. 

The Governance and Executive Compensation (GECC) Committee’s primary role is to ensure that the Board of Directors provides for effective governance of Vancity Community Investment Bank and that the governance practices evolve with the needs of the Bank and the expectations of the stakeholders (shareholder, members, employees, regulators).  The Committee is also responsible for ensuring the performance of the CEO and compensation of the CEO is appropriate in relation to the Bank’s needs and objectives.

VCIB is a subsidiary of Vancouver City Savings Credit Union (“Vancity”). Vancity retains an independent compensation consultant, Mercer, to provide advice on the various elements of total rewards programs, including that of the Bank, where necessary.

The policy and competitiveness of the total reward programs is reviewed annually to ensure changing market conditions are considered and that the Bank has the ability to attract and retain employees needed to deliver on its business objectives.

The Bank endeavours to ensure that the remuneration policy is consistent with the business model. The senior management team’s total rewards package consists of base salary and an annual variable incentive plan aligned with organizational objectives. Performance measurements used to calculate variable remuneration are adjusted to take into account current or potential risks to the company and is comprised of both individual and organizational performance objectives.  Organizational objectives build a strong connection between Business Goals and the Business Plan.  Achievement levels are stated as “Threshold”, “Target” and “Trajectory”. The Target reflects the Board approved Plan.  There is no payout if threshold is not achieved.  Individual performance objectives are weighted and rated by the manager to determine the individual performance score.

For 2019, the total amount of fixed and variable remuneration for  14 key VCIB management was:

Total value of remuneration for 2019 Unrestricted Deferred
Fixed remuneration    
·         Cash-based $1,241,484 n/a
·         Share and share-linked instruments n/a n/a
·         Other (severance) n/a n/a
Variable remuneration    
·         Cash-based $ 296,477 n/a
·         Shares and share-linked instruments n/a n/a
·         Other n/a n/a
Total $1,537,961  

Vancity Community Investment Bank is a member of CDIC and is a Certified B-CorpTM