2020 was a pivotal and challenging year. We take great pride in how we came together to support each other, our members and clients during this unprecedented time.
Restructuring system liquidity for the benefit of the credit union system
One of our core initiatives in 2020 was to restructure liquidity management for the benefit of Class A members. We successfully delivered on this commitment to transition overall liquidity management within B.C. and Ontario credit unions from a deposit structure to an investment structure.
This once in a generation shift for the credit union system in B.C. and Ontario was a complex project to complete in one year – especially during a pandemic.
- Transform overall liquidity management within B.C. and Ontario credit unions from a deposit structure to an investment structure.
- Engage and support members every step of the way and chart the path to long-term stability and success.
- Complete the MLP transition within one year — on January 1, 2021 — despite the challenging timetable.
In parallel with MLP segregation, Central 1 developed and delivered, in partnership with Credential Qtrade Securities Inc., the Asset Management Services to assist credit unions in managing their portfolios of securities post-MLP segregation. The initial uptake was strong with approximately 90 per cent of our members selecting the service.
Central 1, together with our credit union members and in collaboration with our regulators, achieved a significant milestone for the credit union system in B.C. and Ontario.
We are stronger together. We clearly see how collaboration, scale and expertise is the source of Central 1 and the credit union system’s competitive advantage.
Treasury: Maintaining confidence in the credit union system
Central 1’s Treasury business continues to deliver strong and consistent contributions to Central 1 earnings. In 2020, our team of experienced Treasury professionals worked through multiple periods of economic uncertainty and focused on making the right decisions to create sustainable value for Central 1, our members and clients.
As primary liquidity provider to the credit union system, Central 1 ensures we have appropriate levels of liquidity to support and maintain confidence in the credit union system. We took many important steps in 2020 to ensure Central 1’s operational resilience and that of the system.
We bolstered our balance sheet to create more short-term liquidity for Central 1. We also secured access to two Bank of Canada programs: Commercial Paper Purchase Program and Standing Term Liquidity Facility.
We facilitated approximately $5 billion of new securitization transactions as credit unions increased system liquidity levels. We also helped facilitate a member’s Insured Mortgage Purchase Program transaction of $176 million to support their liquidity management.
As credit unions actively increased their overall liquidity, we responded to our members’ needs. Central 1 developed a special deposit note, a proprietary short term investment solution that offered exceptional flexibility.
To support our Commercial Real Estate Lending clients, Central 1 offered principal and interest deferral options. Of the initial 25 borrowers that elected loan payment deferrals, one deferral participant remained at the end of the year.
From supporting our members through bolstering our balance sheet, securitization or investing in short-term special deposits, Central 1 is committed to providing our members with the expertise, products and services to ensure their success, and by extension, the financial well-being of Canadians.
Supporting our employees, members and clients during the pandemic
When the World Health Organization declared COVID-19 a global pandemic in March 2020, Central 1 enacted our Pandemic Response Plan and established a cross-functional response team to ensure we could make quick decisions.
The health and well-being of Central 1’s employees, members, clients and communities were a top priority.
Approximately 98 per cent of staff worked remotely, apart from a very few critical roles. Our robust IT infrastructure enabled Central 1 to seamlessly continue supporting our day-to-day operations. We provided staff with additional health and wellness support and launched monthly Pulse Check surveys to receive feedback from employees.
Support for member and clients
We facilitated approximately $5 billion of new securitization transactions and a $176 million Insured Mortgage Purchase Program transaction to support our member’s liquidity management. We also secured access to the Bank of Canada’s Standing Term Liquidity Facility and Commercial Paper Purchase Program. We offered principal and interest deferral options to our Commercial Lending clients and developed special deposit notes to support excess liquidity.
Digital and Payment Services
We processed a record number of Interac e-Transfer® transactions as more Canadians used electronic payments. In partnership with Canada Revenue Agency and Payments Canada, we implemented a system-wide initiative, providing Canadians with quick access to register for CRA payments, including the Canada Emergency Response Benefit. We worked with Export Development Canada to establish credit union access to the Canada Emergency Business Account loan program, facilitating 28,000 applications worth over $1 billion in loans. We also streamlined and accelerated our Digital Banking Platform launches and product enhancements.
As the pandemic continues to unfold, Central 1 is focused on supporting our employees, members and clients.
Leadership through adaptation for true digital transformation
Having provided award winning digital banking platforms and services for decades, Central 1 is constantly enhancing our products and developing our own intellectual property to guide our clients through digital transformation as technology and expectations change.
We worked quickly with Canada Revenue Agency (CRA) and Export Development Canada (EDC) to implement digital features to support COVID-19 programs like the Canada Emergency Response Benefit (CERB), the Canada Emergency Business Account (CEBA) and the Canada Emergency Wage Subsidy (CEWS).
We completed a Digital Banking Services Upgrade, introducing scalability and security enhancements on our Forge Digital Banking Platform. We refined the MemberDirect® experience with enhancements including the largest release in the platform’s history, leading to average Mobile App ratings of 4+.
The Forge Retail suite provided many client-requested features like 2-step verification and Interac e-Transfer® scheduled transfers, while the Forge Business suite progressed with Envision Financial, who provided a pilot group of small businesses with our Forge Small Business experience.
Accessibility compliance became a greater priority for Ontario clients, as legislative changes to the Accessibility for Ontarians with Disabilities Act (AODA) were announced for 2021. To enable clients to complete this in time, we processed over 1,300 support tickets.
We prioritized innovation by enabling vendors on Forge Community like Back Office Collaborative, G&F, Do Some Good, ASAPP Technologies, thirdstream, Coconut Software and ASAP Cheques. Many widgets become available to clients, empowering them to deliver new experiences for their members and customers.
By providing digital banking tools that are innovative, cost effective and responsive to Canadians’ needs, we are helping our clients towards an ever-evolving digital transformation mindset that will enable them to thrive now and in the future.
Ensuring the continued safety and soundness of Canadians’ payments
Central 1 is an integral part of Canada’s financial services system, processing more than 645 million payments annually on behalf of 295 financial institutions for over 5 million Canadian individuals and businesses. We value our position as a trusted payments partner to the credit union system and within the overall Canadian financial services industry.
As one of 16 Direct Participants in Canada’s Large Value Transfer System (and a participant in the replacement high value transfer system, Lynx, which goes live in August 2021), Central 1 settles billions of dollars in wire payments every month for the credit union system and other financial institutions. Th e pandemic did not hamper our preparations for Canada’s Payments Modernization project, and we met all Payments Canada Lynx milestones including beginning industry testing in preparation for the switch to Lynx. Work included integration testing for an upgraded solution to ensure the continued safety and soundness of the wire payments we process when Lynx goes live.
In 2020, we successfully managed the largest increase in Interac e-Transfer® transactions that Central 1 has experienced since we began offering the service a decade ago. We experienced an almost 50 per cent year-over-year increase in the number of Interac e-Transfer transactions we processed in the six months following the declaration of the COVID-19 pandemic. We helped Libro Credit Union become the first financial institution in Canada to provide Interac scheduled e-Transfers.
Canadians’ increasing adoption of digital payments is a catalyst for significant transformation. Central 1 is confident in our ability to support our clients to deliver payments safely, efficiently and cost-effectively.
Payments Modernization: Positioning our clients at the forefront of Canada’s digital payments future
As Canada modernizes its payments systems, Central 1 is ready, as we work closely with Payments Canada and Interac® to meet their Payments Modernization milestones. We are proud to have rounded off 2020 by receiving strong support from our members on our payments strategy, which positions our clients for growth, innovation, and at the forefront of Canada’s digital payments future.
By supporting Central 1’s payments strategy, our clients will benefit from our cost-effective utility payments infrastructure and continued operational support from our payment experts, ensuring they benefit from the faster, data-rich payments and innovation opportunities which will improve the customer experience when the Real-Time Rail goes live in 2022. Our payments strategy will also ensure our clients are fully compliant, have effective fraud and risk management procedures and payments processing capabilities.
In 2020 we formed the Central 1 Payments Customer Advisory Council, an open and collaborative approach to shaping our Payments Modernization strategy, by involving our B.C., Ontario and Atlantic payments clients. The Payments Council ensures our clients’ voices are included in shaping our new payments infrastructure, products and services required to achieve compliance with Payments Canada’s modernization initiative and to help Canadian businesses and individuals benefit from the faster, secure, data-rich payments coming to Canada in 2022.
Central 1’s priorities this year include execution of our strategy, including successful go-live of Lynx (Canada’s new high-value payments system), beginning deployment of exciting new Interac e-Transfer® functionality to our clients and implementing an enterprise payments platform and enterprise fraud solution.
Board of Director's Report
This year was certainly like no other. I am proud of how our system supported each other through a very challenging year. Central 1 focused on maintaining essential products and services, while delivering core business functions for the credit union system and clients. Our priority throughout was the health and well-being of our employees, members and clients.
As we reflect on 2020, the organization has demonstrated our resilience, focus and purpose. Your success and the financial well-being of Canadians continues to be our compass.
I am encouraged to see how Central 1 and the credit union system in B.C. and Ontario are navigating the pandemic together. We are grateful credit unions have a renewed connection to Central 1. We’re here to support you every step of the way.
Accomplishments in a challenging environment
Central 1 generated strong earnings with solid and consistent contributions from Treasury. Our balance sheet is strong. We successfully segregated the Mandatory Liquidity Pool in collaboration with our regulators and credit union members.
Within Digital & Payment Services, in partnership with the CRA and Payments Canada, Central 1 enabled our clients to implement a system-wide initiative designed to provide Canadians with the ability to register to have their CRA payments — including the Canada Emergency Response Benefit — quickly and automatically deposited into their account at their financial institution.
We demonstrated our agility by pivoting to provide credit unions quick access to Canadian Emergency Business Account loan forms. We successfully handled increased digital and payments transactions as more Canadians turned to digital banking and continued to meet all Payments Canada’s payments modernization milestones.
We adapted with focus. We have overwhelmingly demonstrated our ability to deliver the products and services you need with a high level of client service.
We are committed to supporting you
Turning to 2021, we are finalizing our three-year strategic plan, which will serve as the roadmap for how Central 1 will position ourselves for the future. Collaboration, scale and expertise remain our competitive advantages, and we are a strong and stable organization that will continue to support you through the changes and opportunities disrupting our system.
As we develop our strategic plan – what hasn’t changed is our commitment to our members. We need to run our organization exceptionally well, while we transform our organization for the future.
Our members and clients expect us to deliver the right products and services in treasury, digital banking and payments, while also being as efficient as possible in an increasingly competitive environment. This is truly a time for us to work together to meet the challenges facing our industry head-on and the unknowns we face in 2021 and beyond. I am very optimistic about our future together and I look forward to continuing to build a stronger organization together.
On behalf of our board, I’d like to extend our thanks to Mark Blucher, who stepped down as President and CEO of Central 1 this year to pursue a different future. We are grateful for his many contributions to Central 1 and the industry.
The board has appointed Sheila Vokey as interim President and CEO, previously Chief Financial Officer. Sheila brings a deep knowledge of Central 1, and extensive experience in business, risk and finance. We have started an executive search for a new CEO and expect this process to conclude later this year. In addition, Kathy Parslow has joined the executive leadership team as Chief Corporate Services Officer along with Kelly Latzel, Senior Vice President of Strategy, Marketing and Communications and Acting CFO Brian Li. We welcome Sheila, Kathy, Kelly and Brian.
Thank you to my fellow board directors for your support and guidance during this unprecedented year. I want to express my appreciation and gratitude to our executive team for your calm, clear leadership and direction as you steered the organization to support our members and clients. I would like to extend my appreciation to our members, clients and partners for your collaboration, trust and engagement as we all focused on maintaining confidence in the credit union system.
Finally, thank you to all our Central 1 colleagues for your commitment, dedication and care for each other, as you managed the challenges with so much grace and focus. We look forward to continuing to build stronger connections and maintain your trust, as we continue to navigate the many opportunities and challenges facing our industry.
Interim President & CEO Message
Guided by our purpose
The year 2020 will be remembered for many extraordinary challenges we all faced when COVID-19 was declared a global pandemic in March 2020 and resulted in widespread public health and macroeconomic impacts.
Our thoughts are with those who have been directly impacted by the virus. We’re incredibly grateful to all our healthcare and other essential workers across Canada who are dedicated to helping all of us.
Though it was a challenging year for many of us both professionally and personally, I hope this year will be remembered more for our collective resilience, collaboration and support for one another. We connected differently, found new ways of working with colleagues and members, and witnessed the strength of our communities. We are stronger together.
At Central 1, we are committed to helping you every step of the way. We adapted and pivoted while sustaining our high levels of member and client service you expect. While many things changed this year, what hasn’t changed is our focus supporting the success of our members, clients and the credit union system, and by extension, the financial well-being of Canadians.
Strength in numbers
Central 1 reported a profit after tax of $36.1 million. We delivered solid earnings during an uncertain macroenvironment driven by the global pandemic. Our strong balance sheet and diverse business lines are a testament to the strength and resilience of our business and our ability to effectively operate and progress our strategic initiatives in a challenging environment.
We consistently maintained strong operational resilience to support credit unions in B.C. and Ontario. Central 1 made significant accomplishments this year while advancing our strategic initiatives, including our collaborative work on segregating the Mandatory Liquidity Pool (MLP) and our progress on digital and payments. We focused on maintaining essential products and services, while delivering core business functions for the credit union system and clients. Our success is underpinned by our people who have been unwavering in their commitment to support our members and clients.
Adapting with resilience
When COVID-19 was declared a global pandemic, Central 1 enacted our Pandemic Response Plan and established a cross-functional response team. We supported the health and safety of our employees while ensuring we delivered high levels of client service to our members and clients. Our robust IT infrastructure and remote working capabilities enabled 98 per cent of our staff to work from home, apart from a few critical roles. Central 1 seamlessly continued supporting our daily operations and essential services.
We continued to rise to the challenge, pivoted, adjusted, stopped, restarted and developed creative and innovative solutions to support our member and clients. This is a strong demonstration of the agility within Central 1 and within credit unions. We were resolute in our support and resolve – in delivering critical and essential services to our members, clients and the system as a whole.
Many tell us they valued the opportunities Central 1 created for credit union leaders to collaborate as the pandemic evolved and ensured our members felt supported in this time of uncertainty. Our engagements enabled you to share knowledge around critical issues such as: digital transformation, open banking, payments modernization, operational planning, and the impact of COVID-19, through weekly member roundtable meetings and our series of Strategic Insights Webinars. It has been so encouraging to witness our collective collaboration through our many engagements, shared learnings, ideas and dialogues.
Our team is focused on making the right decisions to create sustainable value for Central 1, our members and clients. As primary liquidity provider to the credit union system, Central 1 ensures we have appropriate levels of liquidity to support and maintain confidence in the credit union system. We took many important steps in 2020 to ensure Central1’s operational resilience and that of the system. We bolstered our balance sheet to create more short-term liquidity; secured access to available programs from the Bank of Canada and facilitated credit union access to the Insured Mortgage Purchase Program.
Central 1 also supported members’ liquidity needs through securitization and by accommodating elevated system liquidity through special deposit offerings as credit unions actively increased their overall liquidity needs.
Restructuring system liquidity
On January 1, 2021, Central 1 successfully delivered on our commitment and successfully transitioned overall liquidity management within B.C. and Ontario credit unions from a deposit structure to an investment structure for the benefit of the credit union system. Segregating the MLP created closer alignment with federal and international regulatory standards. Credit union members received market value for the deposits. We also provided a dividend of $13.4 million and returned almost $400 million in capital to our members.
In parallel, Central 1 developed and delivered, in partnership with Credential Qtrade Securities Inc., the Asset Management Services to assist credit unions in managing their portfolios of securities post-MLP segregation. The initial uptake was strong with approximately 90 per cent of our members selecting the service.
Leading by adapting
As Canadians accelerated their usage of digital channels for banking and payments, our digital infrastructure, technology, and core systems successfully handled the increased traffic. Central 1 is frequently enhancing our products and developing our own intellectual property to guide our clients through digital transformation as technology and expectations change.
Central 1 focused on streamlining our Digital Banking Platform launches and product enhancements, empowering clients to confidently meet the changing demands facing their organizations.
Continued safety and soundness of payments
In 2020, we successfully managed the largest increase in Interac e-Transfer® transactions that Central 1 has experienced since we began offering the service a decade ago.
The pandemic did not hamper our preparations for Canada’s Payments Modernization project, and we met all Payments Canada Lynx milestones including early industry testing in preparation for the switch to Lynx. Work included integration testing for an upgraded solution to ensure the continued safety and soundness of the wire payments we process when Lynx goes live.
Positioning our clients at the forefront
We are proud to have rounded off 2020 by receiving strong support from our members on our payments strategy, which will position them for growth, innovation, and at the forefront of Canada’s digital payments future. Our clients will benefit from a cost-effective utility payments infrastructure and continued operational support from our payment experts.
We formed the Central 1 Payments Customer Advisory Council, an open and collaborative approach to shaping our Payments Modernization strategy.
A sustainable, diverse and inclusive future
Central 1 is helping to lead the way towards a more sustainable, diverse and inclusive future – for our clients, their customers and society as a whole. Central 1 is addressing inequities in Canada by taking intentional steps to promote diversity within our organization and in the communities we serve. We are also committed to integrating Environmental, Social and Governance (ESG) factors into our practices to grow and support responsible investing in Canada.
This year, Central 1 signed the Canadian Investor Statement on Diversity & Inclusion, a new initiative coordinated by the Responsible Investment Association. As a signatory to the statement, Central 1 acknowledges the existence of systemic racism and its impacts on Black and Indigenous communities and People of Colour in Canada and globally. We also recognize the existence of inequities and discrimination with respect to gender, sexual orientation, age, disability, religion, culture, and socio-economic status.
As a co-operative, we understand the importance of community and sustainability. We are focused on leveraging our day-to-day business to contribute towards a more sustainable future – for our members, their customers and society.
During times of change, we clearly see how collaboration is the source of the credit union system’s competitive advantage. We will stay connected with our members and clients. Your voice is important. We will continue to listen to you and are committed to aligning our products and services to your needs.
In 2021, Treasury and Digital and Payment Services remains Central 1’s operational focus, ensuring we deliver the products and services to meet the diverse needs of our members and clients. As an organization, we remain steadfast in providing a high-level of client service while improving our operational efficiency.
We have a strong balance sheet, a diverse business and a deep understanding of our members and clients. Building on our achievements in 2020 and the successful delivery of our 2018-2020 strategic plan, we are now focused on developing a new strategic plan for the next three years. Central 1 will continue to be innovative and adaptable to support the success of our members, clients and the credit union system.
Thank you to all our Central 1 colleagues for your commitment, dedication, and care for each other. There is a lot we can be proud of in 2020. Thank you to our Board of Directors for your insight and guidance. I want to thank our members, clients, partners and investors for your support and trust in Central 1 as we navigated 2020 together.
Let’s all continue to stay connected and take care of each other and our members.
On behalf of the Central 1 team, we look forward to supporting you in 2021.
- Lower yield curve and shorter duration for investments due to the segregation
- Strong growth in our investment portfolios from increase in deposit funding from credit unions
- Higher net realized and unrealized gains
- Increase in Interac e-Transfer® volumes
- Rollout of the Forge Digital Banking Platform and payments modernization
- Spending on the development of a new banking system and initiatives aimed to expand corporate efficiency
1 The Mandatory Liquidity Pool was segregated from Central 1 Credit Union effective January 1, 2021.
2 Earnings per share is calculated by dividing profit after tax by the average number of shares of all classes that are outstanding.