Meridian Credit Union Ltd., Ontario’s largest credit union, just got one step closer to opening a digital national bank, which will be called “motusbank.”
The lender had originally planned to launch motusbank sometime this year. In April, however, its chief executive said that April 2019 was looking more likely. “Our specific launch date remains flexible,” Pagnutti told the Post, “as it is contingent on final approval from OSFI.”
Meridian announced its plan to open motusbank back in August 2016 and plans to operate as a bank rather than a credit union. Credit unions are not-for-profit financial cooperatives. Their earnings are paid back to members in the form of dividends, lower fees and higher interest rates on deposits. Banks, on the other hand, are for-profit enterprises, and their earnings are generally paid to shareholders (though Meridian has said it has no intention of making motusbank public).
Meridian flirted with the idea of becoming a federal credit union, but ultimately decided against it, since Canadians are more familiar with banks than credit unions. “The understanding of credit unions is not where we’d want it to be,” Meridian’s CEO Bill Maurin told CBC News in 2016. In October, the Office of the Superintendent of Financial Institutions (OSFI) issued Meridian with letters patent, which effectively grant Meridian the right to create motusbank.
This, the Financial Post said, was a “key hurdle” for Meridian to clear in bringing its new digital bank to life.
“...We are one step closer to taking the Meridian banking experience beyond Ontario’s borders and making it available to all Canadians,” said spokesperson Teresa Pagnutti in an email to the Post.
The entire process comprises a few steps, and goes something like this: First, OSFI conducts a review. Next, OSFI makes a recommendation to Canada’s finance minister. The minister decides whether or not to issue letters patent. Once issued, this means that the lender has been officially created. After that, Meridian needs to obtain an “Order to Commence and Carry on Business,” which is issued by OSFI.
That will be Meridian’s next job. “A newly incorporated federally regulated financial institution may not commence operations until it completes the second step, which is there to ensure the federally regulated financial institution in question has the necessary systems, management structure, control processes and regulatory compliance management systems in place,” OSFI spokesperson Annik Faucher said in an email to the Post.
Meridian also said that motusbank would not be a publicly traded company, and that it would operate as a separate entity from Meridian. That means it would have its own customer base and banking system. There would be no physical branches, either, “for the foreseeable future.” The bank would be entirely digital.
In a 2016 press release about motusbank, Meridian said: “Like Meridian Credit Union, it will not be hostage to quarterly earnings per share targets the way that publicly traded banks are, and will therefore take a long term view in terms of how it invests to serve its customers.”