Mr. Ed Sibley:

To be absolutely clear, I largely agree with what the Chairman has described except, perhaps, for his final point. There is a proportionate approach to the regulation of credit unions. There is both explicit and implicit proportionality. Our work in the credit union sector is to focus on those areas of highest impact and highest risk. With the exception of those which are in trouble from the sustainability perspective, we are essentially looking at the smaller credit unions on an off-site basis. We get their returns and engage with them through seminars and speeches. We have a minimum expectation in what we expect from them. The intensity of our supervision is much lower. Connected to that is the expectation that they are not doing things that are particularly exotic or innovative. Typically, they will not have deposits that go beyond the deposit guarantee scheme and we would not expect them to engage in significant longer-term lending and so on, because they are small, very local and should be ensuring that they are protecting their members' funds and delivering on their purposes. As the credit unions get bigger or they look to do more, such as longer term lending, invest or hold higher numbers of deposits, then our expectation grows both in some of the requirements we put upon them and also in the level of our intensity of our supervision. There is a natural tiering and proportionality of our supervision. We absolutely expect that they will serve local members' needs - that is the purpose of the sector and we are very supportive of it - but it is different where they are discussing getting into more sophisticated products that are very costly and complex. There was a lot of discussion about mortgages today. In some respects, people think they are simple but they are complex products that have many costs associated with them.

If a credit union wants to start lending longer term and doing mortgage lending then it needs to have a degree of scale or access to scale, so either it is large enough to do it itself or it has access to some kind of shared services model. We are working really hard with the sector. There is a business model development team and we are meeting the CEOs. Individually the registrar meets them through the seminars. The level of engagement we have, not just because we are supervising them but in all manners of ways to try to support credit unions' development and growth, does not compare to any other sector in which we are engaged. It is so much more.