Vancity and today’s markets - a message for members from Vancity CEO Tamara Vrooman

Dear Vancity Member,

August 13, 2008 marked a somewhat infamous milestone: the first anniversary of the asset-backed commercial paper (ABCP) meltdown. Just over a year ago, we saw the unprecedented happen in the subprime mortgage market, where banks experienced massive loan losses and a reduction in their capital.

More than 12 months later, the financial services industry's “15 minutes in the spotlight” continues to drag on, and for all the wrong reasons. Tumbling commodity prices, the demise of once-venerable investment banks, the US Government's $85 billion rescue of AIG, the takeover of Washington Mutual and Wachovia banks, and the rejection of a $700 billion financial bailout bill in the US House of Representatives—a bill which will shortly be revived—are just a few of the financial stories that have dominated the headlines over the past weeks.

Although we are across the border and exist in a well regulated banking environment, you no doubt have many questions about the challenges faced by the financial services sector. It is no surprise that you have concerns—about your deposits, about your financial institution, and about your futures. You're asking, “Is my money safe?” The answer is yes.

When the ABCP crisis hit last year, Vancity took immediate action on two fronts. We acted early and in the best interests of our members by being the first to ensure that the small number of members who held ABCP in their portfolios on our advice were looked after. We also fine tuned the pace at which deposits were coming in and lending was going out so we could continue to make capital available to our members. By managing the funding or liquidity gap, we knew we would have slower growth, but we would preserve our capital cushion and the soundness of our credit quality.

Essentially, as the market changed, we stuck to our roots and to our sustainable co-operative banking model where members' deposits fund members' loans. We also ensured we did our work on the inside to manage the rate at which we were spending on our business.

So, our deposit base is solid, and we have been able to ensure we continue to lend to our members. We are on track to meet our earnings projections for the year so that we can continue to support you and our communities through our Shared Success program, in which we give back 30 per cent of our net profits.

But the credit crisis is not over yet, and the restructuring of the financial services industry will continue. As stewards of our members' money and a trusted community partner, we are accountable for understanding the ramifications of this evolution of our industry. We will adapt accordingly to ensure we can continue to serve the needs of you and our communities.

We are local, member-owned and member-operated—“members serving members”—a locally connected and community-rooted financial co-operative.

All of us at Vancity look forward to continuing to be a strong and trusted part of your life and your community, just as we have been for the past 62 years.

Tamara Vrooman CEO