Banking Needs for Leaders January 17, 2019 Presented by Chris Sicotte

 Financial Services Professional with over 26 years of experience

 Experience in both consumer & commercial banking

 Board Member of AFOA Saskatchewan & Former Board Chair of AFOA Canada

 Also member of the following Boards & Committees:

 Greater Saskatoon Chamber of Commerce (1st Vice Chair)

 City of Saskatoon Cultural Diversity & Race Relations Committee (Chair)

 Saskatchewan First Nations Family & Community Institute Inc.

 Provincial Métis Housing Corporation

 AIDS Saskatoon

 Kitotaminawak Parent/Community Council – Oskayak High School What makes the financial institutions different? Banks

 Governed under the Bank Act  Personal deposits insured by Canada Deposit Insurance Corporation up to $100,000  Generally speaking commercial deposits are not covered under CDIC insurance  For profit corporations, little or no Indigenous representation on Boards.

Trust Companies

 Governed under Provincial legislation  Generally operate the same as Banks (i.e CDIC insurance)  Some restrictions on lending practices  Also for profit corporations Credit Unions in Saskatchewan

 Operate under the Credit Union Act  Provincially regulated  All deposits are 100% insured by Credit Union Deposit Guarantee (“CUDG”)  Financial co-operatives, founded on Co-operative values  Recent changes have allowed Credit Unions to be Federally regulated. Main change = move to CDIC insurance vs. CUDG Main Services

 Regardless of whether it’s a Bank, Trust Company, or Credit Union all 3 offer the same core services:  Deposit services (Chequing and Savings)  Lending services (Loans & Mortgages)  Wealth Management (Trusts, Retirement Savings) As a leader, what should you be looking at from your Banking relationship?

 First things first, it’s a relationship  This means it should be founded on mutual respect and understanding of the core values of both parties  If these values aren’t aligned, then there will be tension between the parties  Partnerships: lots of talk about this, but what does this look like?  The true test of the relationship will be when the Band incurs “bad times” & how this is managed. What about Requests for Proposals?

 An excellent opportunity to “test the waters”  It’s not uncommon for the FI’s to request information: like 3 years of financial statements, copies of account statements, etc.  Usually for a fixed term (3-4 years)  REMEMBER: sometimes lowest cost means some degree of loss of service. Also RFP’s can sometimes only cover one area of the relationship.  Also there will be costs associated with moving banks: such as cheque orders, cash management fees, plus time costs associated with contacting vendors on pre-authorized payment or direct deposit  HINT: see if the new FI will pick up some or all of these costs What about borrowing?

 Most FI’s have developed lending policies & procedures specific for First Nations  In most cases for commercial entities the procedures are the same as for mainstream commercial, although some changes for on-reserve business  However, in most cases the maximum amortization is usually 10 to 15 years maximum. Normally does not meet the estimated useful life of the asset (if for infrastructure financing) Borrowing (con’t)

 Keep in mind there are costs for borrowing, such as:  Legal fees  Professional fees  Cost for appraisals  Application fee: generally this is anywhere from ½ to up to 1% of the total amount of credit being borrowed  In my experience the first 3 are all costs that the Borrower will bear, the application fee is sometimes financed as part of the loan Are all rates the same?

 Short answer: NO!!  FI’s each have different criteria for how they assess the risk of a First Nation  Lower risk First Nation = better rate  Prime rates are not the same between FI’s Prime Rates as of January 17, 2019 (with comparison to 2018)

 These are the Prime Interest Rates as of the above date:

Bank Prime Rate 2019 Prime Rate 2018 BMO 3.95% 3.20% CIBC 3.95% 3.20% HSBC Bank Canada 3.95% 3.20% RBC 3.95% 3.20% Scotiabank 3.95% 3.20% TD Canada Trust 3.95% 3.20% First Nations Bank of Canada 3.95% 3.20% Credit Unions Affinity Credit Union 3.95% 3.20% Innovation Credit Union 3.95% 3.20% Raymore Credit Union 4.25% 4.25% Other Peace Hills Trust 3.95% 3.75% On reserve bank? Is it important?

 In Saskatchewan there are 5 FI branches located on- reserve, namely:  CIBC: Lac La Ronge  Peace Hills Trust: Fort Qu’Appelle (Starblanket) & Saskatoon (Muskeg Lake)  First Nations Bank of Canada: Flying Dust & Saskatoon (Yellow Quill)  If asked RBC will set up accounts at their Peguis branch in Manitoba On Reserve Bank? Is it important? (con’t)

 For a First Nation Band, there is little benefit as they are already exempt from taxes under the Income Tax Act (forming a function of government)

 Also some issues of whether Section 89 exemptions apply to Bands (McDiarmid Lumber decision)

 Some Banks are now requesting Section 89 waivers as part of their security packages (especially as it relates to equipment financing). Leases & Conditional Sales Contracts are exempt from Section 89

 Band owned corporations do not have Section 85 or 89 status, thus the change of businesses to Limited Partnerships

 Biggest benefit is to the individual Band member. Some things to consider

 Does your FI have dedicated Account Managers that deal with First Nations?  Are they Indigenous? (First Nations or Métis)  Commitment to First Nations communities?  Are First Nations part of their long term business strategy or is it just “flavour of the day”?  Decisions are generally not done at the Account Manager level, have to be escalated to Risk Management for approval. Economic Reconciliation

 The FI’s have a role in developing and implementing economic reconciliation for First Nations communities  Are they committed to UNDRIP & TRC Call to Action #92? If so what actions are they taking?  Policies or products to address the key issues on reserves (housing, infrastructure, etc.)  Employment (the “Red Ceiling”)

In Summary

 The relationship you have with you financial institution should be one of the most important relationships you have

 Banks are becoming more competitive for First Nations business

 RFP’s are an excellent way to see what the market is prepared to offer, but keep in mind that should you switch banks there will be costs associated with it

 There are new entrants coming into the market, especially on the finance side. Make sure to thoroughly read everything. The devil is often in the details.

THANK YOU!!