Risk Weighted Assets of a Credit Union
15. (1) In this section, “specific provision” means, in respect of a loan made by a credit union, the amount of the prescribed monthly provision for doubtful loans as determined under subsection 22 (1) that is attributable to the loan and the amount of the prescribed reserves as determined under subsection 22 (2) that is attributable to the loan. O. Reg. 560/06, s. 6 (1). (1.1) The amount of a credit union’s risk weighted assets is the amount calculated using the formula, A + B + C in which, “A” is the sum of all amounts each of which is calculated by multiplying the value of an asset of the credit union by the percentage described in subsection (2), (3), (4), (5), (6), (7) or (8), as the case may be, that applies to that asset, “B” is the amount of the credit union’s applicable operational risk as determined under subsection (9), and “C” is the amount of the credit union’s applicable interest rate risk as determined under subsection (11). O. Reg. 560/06, s. 6 (1). (2) The percentage is zero per cent for the following types of assets: 1. Cash. 2. Claims against, or guaranteed by, the Government of Canada or an agency of the Government. 3. Claims against, or guaranteed by, the government of a province or territory of Canada. 4. Claims for which the collateral is cash or securities issued by the Government of Canada or the government of a province or territory of Canada. 5. Residential mortgage loans insured under the National Housing Act (Canada), guaranteed by a government agency or insured by an insurer approved by the Superintendent. 6. Securities that are secured by mortgages and insured under the National Housing Act (Canada), guaranteed by a government agency or insured by an insurer approved by the Superintendent. 7. Investments in bodies corporate that are accounted for in the credit union’s financial statements using the equity method. 8. Any deductions from regulatory capital, including goodwill. 9. Deposits in a league or Credit Union Central of British Columbia. 10. Loans guaranteed by a community loan fund corporation under the Community Economic Development Act, 1993. O. Reg. 76/95, s. 15 (2); O. Reg. 560/06, s. 6 (2); O. Reg. 298/07, s. 1. (3) The percentage is 20 per cent for the following types of assets: 1. Cheques and other items in transit. 2. Claims against or guaranteed by a municipality in Canada. 3. Claims against or guaranteed by a school board, university, hospital or social service provider in Canada that receives, as its primary source of funding, regular government financial support. 4. Deposits in a deposit-taking institution in Canada. 5. Commercial paper, bankers’ acceptances, bankers’ demand notes and similar instruments guaranteed by a deposit-taking institution in Canada. O. Reg. 76/95, s. 15 (3). (4) The percentage is 35 per cent for the following types of assets: 1. Residential mortgage loans, other than those described in paragraph 5 of subsection (2), that are not 90 days or more past due. 2. Securities that are secured by mortgages, other than securities described in paragraph 6 of subsection (2). O. Reg. 560/06, s. 6 (3). (4.1) Revoked: O. Reg. 560/06, s. 6 (3). (5) The percentage is 75 per cent for the following types of assets: 1. Personal loans. 2. Agricultural loans. 3. Commercial loans made to a person where the sum of all commercial loans made to that person and to any connected persons does not exceed the lesser of 0.035 per cent of the credit union’s total assets and $1.25 million. 4. Residential mortgage loans other than those described in paragraph 5 of subsection (2) or paragraph 1 of subsection (4). O. Reg. 560/06, s. 6 (3). (6) The percentage is 100 per cent for the following types of assets: 1. Commercial loans, other than commercial loans described in paragraph 3 of subsection (5) or paragraph 1 of subsection (7). 2. All assets not described in subsection (2), (3), (4) or (5). 3. The value attributed to any off balance sheet exposure of the credit union as calculated in accordance with the Capital Adequacy Guideline for Ontario’s Credit Unions and Caisses Populaires. O. Reg. 76/95, s. 15 (6); O. Reg. 314/98, s. 8 (2); O. Reg. 560/06, s. 6 (4, 5). (7) The percentage is 150 per cent for the following types of assets: 1. The unsecured amount, net of any specific provision, of loans that are not residential mortgage loans and that are 90 days or more past due, but only if the specific provision for a loan constitutes less than 20 per cent of the outstanding amount of the loan. O. Reg. 560/06, s. 6 (6). (8) If a person to whom a commercial loan described in paragraph 1 of subsection (6) is made has a credit rating described in the Capital Adequacy Guideline for Ontario’s Credit Unions and Caisses Populaires, the percentage determined in accordance with that Guideline applies, instead of the percentage specified in subsection (6), in respect of the commercial loan. O. Reg. 560/06, s. 6 (6). (9) Unless another amount is approved by the Superintendent, a credit union’s applicable operational risk is the amount calculated using the formula, D/0.08 in which, “D” is the amount of the credit union’s capital charge for operational risk as determined under subsection (10). O. Reg. 560/06, s. 6 (6). (10) A credit union’s capital charge for operational risk is the amount calculated using the formula,  in which, “E” is the greater of, (a) the amount of the credit union’s interest income less its interest expenses for its most recently ended financial year plus all of its other non-interest income for its most recently ended financial year, and (b) zero, “F” is the amount that would be determined under the definition of “E” if that definition applied to the credit union’s second most recently ended financial year, “G” is the amount that would be determined under the definition of “E” if that definition applied to the credit union’s third most recently ended financial year, and “H” is the greater of, (a) the number of years in which the amounts determined under the definitions of “E”, “F” and “G” exceed zero, and (b) one. O. Reg. 560/06, s. 6 (6). (11) Unless another amount is approved by the Superintendent, a credit union’s applicable interest rate risk is the amount calculated using the formula, J/0.08 in which, “J” is the amount of the credit union’s capital charge for interest rate risk as determined under subsection (12). O. Reg. 560/06, s. 6 (6). (12) A credit union’s capital charge for interest rate risk is the amount calculated using the formula, K × 0.15 in which, “K” is the amount of the credit union’s exposure, determined in accordance with the techniques referred to in paragraph 2 of subsection 78 (1), to interest rate risk. O. Reg. 560/06, s. 6 (6). Adequate Liquidity