Gold Backed Banking: The Best Form of Insurance with Brett Oland, Richard Canfield and Jayson Lowe

About a quarter away from launching gold backed deposits where you can actually deposit fiat currency. And there's no downside to it because you're guaranteed on that and get paid interest on your fiat currency. But you can also take advantage if the price of precious metals goes up. So it basically works as a fiat currency inflation hedge, if you will, for people that want to carry some fiat currency.

How exactly do you go about becoming a gold backed bank? Well, we don't really know, but we're going to find out. We're going to learn what some of the challenges are in making that happen. And we are joined together today here by the incredible Brett Oland, who is the current CEO of Bow Valley Credit Union and for the last five years has been steering that ship at the Helm. He's 20 years as a chartered professional accountant and man, he's been in banking for 20 years. And we're going to learn a lot about banking. We, we talk about banking all the time on this program. But today we're going to go down a little bit of a different track and we're going to hear some of the challenges facing the banking industry that Brett has identified and we're going to share and learn quite a bit about what he's doing to change the game in that environment, at least when it comes to Alberta, Canada. Welcome Brett. Thanks for being on the program today.

Well, thanks for having me. I don't know about the incredible part, but we do what we can so.

Well and we appreciate your advocacy, you know, on behalf of of course your stakeholders, your customers and Albertans and by proxy Canadians. I mean the ripple effect in the economy from province of Alberta is remarkable. And there's a lot of, I think unintended consequences as a result of some of the proposed legislation and things that are going on backstage that, you know, folks may just not be aware of the constraints that that places on credit unions like yours and the fact that you want to keep capital moving because that's what keeps the economy thriving. It's the heartbeat and circulation of the is money that's in motion and you keep it in motion through the process of lending, being a deposit taking institution and creating opportunities for businesses to gain access to capital to scale quickly. And so my first question for you Brett, is what inspired you to take on the role at the Bow Valley Credit Union? What was that trigger for you?

Well, I was happily semi retired in my previous role at a not for profit organization and I was looking at an ad, I saw that they were looking for board of director members and you know, given my banking career I was interested in that and got onto the board and there was a bit of a shakeup at, at the CEO level. People kept on looking at me and I kept on looking at the ceiling and then keeping looking at me and I kept on looking at the floor and finally agreed to do it. But yeah, I've been having a lot of fun in, in the role it's institution where I think we can really make a difference especially given our value set to our membership and really shake up the way the way banking has traditionally done been done in the past.

So, and what would that for, for our viewers and listeners benefit, what would the primary distinctions be between a credit union versus a, A like a traditional bank, if you will?

Sure. There's about four key distinctions. Number one, we're, we're membership owned, we're not shareholder owned. So anybody that does banking with our credit union is a member and you purchase common shares within their organization and we do pay dividends on those common shares. So it's, you're vested into the organization and our wins are your wins at the end of the year, you know, based on the way we're paying it out that works out to be about a six and a half percent dividend on your money, which is not too bad in today's environment.

Yeah.

Secondly, we're regulated provincially, we're not regulated federally. So the federally regulated financial institutions are regulated by OSFI under Minister Christina Freeland. We'll save our words for that. And so that's your RBCs, your BMOs, your Canadian Western Banks, your TDs, that type of thing are regulated. And there's a few larger credit unions that are regulated federally as well. We're regulated by the Credit Union Deposit Guarantee Corporation which is provincial and they're headquartered in Edmonton. And they tend to generally have the better interest of Albertans in mind. And so it's, we have a great working relationship with, with our regulators and they're regular people that want to help credit unions move forward. Another key distinction, the third key distinction is we have 100% deposit guarantee within Alberta. So any deposit within our organization is 100% insured. Whether it's a dollar or 10 million, you're insured. Whereas with the Schedule 1 banks under the CDIC insurance, if you don't structure it properly, you're only insured up to 100,000. Right. So any dollar above that hundred thousand dollar limit is potentially at risk at other financial institutions. And then finally big distinction number four is we make local decisions. So all of our staff are in Alberta. We have Alberta's best interest in mind. What we typically see, especially in oil downturns and that type of thing that the bigger financial institutions will pull out of. Alberta basically say well these guys are done for a number of years and we have a vested interest in seeing Alberta do well. So we want to be able to provide support especially in the hard times, not just when it's good. So those are some pretty bigger distinctions within our organizations.

I think those are really critical distinctions. And a couple that I want to touch on or highlight for, for our listeners who are very familiar with of course, what we, we teach people about, which is the infinite banking concept. The idea of a mutual insurance company where you are, it is owned wholly by the participating policy owners is very similar in its, you know, general premise as the credit union which is a member owned institution. And so I think that's an important thing to, to identify. And you know, you speaking specifically about the Albertan aspect, I would venture to guess and maybe you could just, you know, quantify this. Other provinces of Canada would have similar rules with credit unions in their respective province. They would be provincially regulated as you said, and in general probably have the, the, the, the province's citizens as more of their, their primary obviously customer base and who they would put their attention on. And so I would imagine that, that regardless what province you're in, there's going to be a lot of similarities to the baseline of how the credit unions operate. Is that a fair assessment?

Yeah, you are correct with that. Although in some provinces don't have the 100% guarantee, sometimes it's only up to about a $250,000 deposit maximum. But for the most part you are correct. They're provincially regulated institutions and operate pretty exclusively within the province that their jurisdiction is under.

And you know, Brett, what are some of the things that are worrying and troublesome right now that you're seeing that you think it would be important for viewers and listeners to be aware of?

I suspect a lot of this has to do with the most recent budget of 2023 and some of the federal things that are looking at being amended or changed like the bank act, the Insurance Companies act, et cetera.

Jury, I can touch on three different things. Back during 2000, after 9 11, the federal government and a lot of western world governments implemented anti terrorism acts to stop the funding through financial institutions. And I think the idea was safety and security in mind. But I think people need to remember as safety and security Increases your freedoms decrease. And so they put in a bunch of rules around anti money laundering sort of thing. And we saw over the past, I think it was about 18, 19 months ago that they, they used this act of fintrac to basically freeze people's accounts that, that donated to the, the freedom convoy, the trucker convoy. And I think some people were put in a very precarious position because they had their knees taken out regardless of if they only donated $25 or something like that. So that's a fairly scary thing that came out. But as a result of that they looked at this tool and in the federal budget they threw a whole bunch more money towards Fintrac, including sort of budgeted money for AI enhancements, criminal enhancements, better links between the government and you know, fintrac. And you know, that didn't really sit particularly well with me because I think anytime you're, you're mixing too much government interference with basically economics, you're going to run into challenges. And so I think that's a big of an issue right now that we're working to get past. Couple other things that are on the forefront is open banking. I'm not sure if you've heard of open banking. Oh yeah, Yep. So yeah, just, just in a nutshell, it basically the simplest example I can use is if you start up a new accounting software, a new budgeting software or something that one of the first things it wants to do, it wants to link to your bank account. And so you basically allow it access that third party provider access to your bank account. You type in the information and it gets a picture of your financial transactions. Right now it uses a technology called screen scraping. It's not terribly effective. It just can grab dates and times and amounts and that type of thing. The Canadian government about three years ago launched a process to create an open banking framework within Canada. So it's basically legislated rules around open banking and how it regulates. And my biggest beef with it is they created this framework so all the information is basically siphoned through a government agency. So when you allow it, not only will open banking go to that one bank account that you assigned it to with the budgeting software, it'll actually go everywhere and grab information from other financial institutions, insurance companies, the cra. And basically what it does is siphon all this information through this government agency and creates a complete financial picture of you. And so again you can probably tell where I'm leaning, but from, from a privacy standpoint that I doesn't sit very well with Me. So we're not opting into open banking. So we're not creating basically the pathway so anybody can get access to anything within our organization. We're legally allowed to do this. We're legally allowed to opt out of this. And I think that's something that people need to be aware of and need to consider, especially from a privacy standpoint when you're dealing with financial institutions.

No kidding like that. Even the fact that that progressed from conversation into any form of action is just mind boggling.

Yeah, exactly, mind boggling.

It's not like the government to do things in a very quick status usually. So the fact they were able to put that together in three years alone is pretty astonishing, let alone what it's up to.

Well, you're absolutely right. And there's one final thing I'll talk about and sort of close this section with some concerns that maybe people have around it. But there's also a bill that's on the table and I think it's passed the third renewal Senate called B15. It's the climate risk mitigation bill and it's a fairly benign document. It talks about greenhouse gas emissions and how we need to cut them down and do our parts and worry about the climate and that type of thing. And it's not particularly damning. But it does link to another bill, s243, which is directed towards the OSV regulated financial institutions. And particularly they seem to be having their sights the oil and gas industry. So any oil and gas. Oil and gas servicing, and I'm sure we'll get into this a little bit later, but capital is very important to financial institutions. Yeah. And they're increasing any lending that you need to do to oil and gas companies from basically by 12, 50%. So if I needed a dollar of capital to lend to an oil and gas service company, I would currently only devote 12 and a half cents of capital to do that going forward. After this bill is passed, it'll take $1.56 in capital to lend to any dollar to an oil and gas industry.

That's astonishing.

Yeah. And effectively it's pretty clear that they're trying to take out the oil and gas industry at the knees by basically forcing the financial institutions not to lend to them. So we don't.

What's amazing is that, you know, your unique position to even read and go, you know, going through these types of documents, learning what's going on in the industry at the CEO level of a banking institution, you're uncovering something that virtually every Canadian citizen wouldn't even know exists unless maybe they were in the oil business and, and they actually were looking once seeking that type of financing and they might have an advanced notice of this. But far and wide, I would venture to guess there's very few people even who would listen to our program that might even know that that level of overreach exists in stipulating the lending capacity of a particular industry to grow its entrepreneurial journey.

Yeah, and it's particularly troublesome when he can read into the document and see it could potentially easily go beyond just the oil and gas industry. They talk about just basically greenhouse gas emitting enterprises. So agriculture comes to mind, mining comes to mind. If you're driving the wrong truck, perhaps that comes to mind. If your house isn't insulated enough, it comes to mind. And just to put it in perspective, a 1,250% increase in capital would move say a 5% mortgage today to a 30% mortgage. So effectively when your mortgage comes up for renewal and all of a sudden that's 30% per annum.

Because it would need to be in order for the lender to make any profit, that's the only way that the function of lending is profitable, which is the whole basis of what you're doing.

Right.

You can't, you can't operate as. Now again, I'm not as familiar with, you know, the guidelines around credit unions, but if we, if we shift to a conventional bank for a moment. You can't function as a conventional bank if you're, if you don't keep capital moving. If you're not, if you're not literally in the, in the banking sector, if you're not literally creating money where no money existed before, it's not going to be long before you're not existing anymore.

Well, exactly. And, and so, you know, put on your tinfoil hats around that. But that's why it's especially important on what you gentlemen are doing is. Oh yeah, giving a heads up that there are alternatives because I think a lot of people will start streaming towards private lending as well as credit unions because we don't fall under OS fee regulation for this type of lending. Because frankly, you're absolutely right. It could potentially collapse industries in Alberta if it's mismanaged.

Yeah. And I'm curious, just does the Minister of Finance office ever reach out to folks like yourself to say, hey shocker, there's going to be some unintended consequences here. Do you mind helping us identify what they are?

Funny you should say that. I actually did write A letter to Nate Horner here in Alberta, the Minister of Finance. And it largely fell on deaf ears, just basically explaining exactly what I just explained here. And it fell on deaf ears, which is very discouraging. And I find, you know, I don't want to get too political, but politicians generally don't do anything unless they have to.

So now this is the same letter, I think, that had 46 pages of identified notes from the upcoming and proposed legislation with very specific identified components where as CEO in relation to Bow Valley Credit Union, you had specific asks that you were recommending really for the benefit not just of your own institution, but actually of all credit unions in the province of Alberta to be able to maybe suggest that the guidelines are modified uniquely for the credit unions. And there was a number of things that you identified in there, one of which actually I think will transition us to. Another part of the conversation is how know, bullion assets are currently being looked at as far as capital requirements are concerned for institutions. And, and so there's many other requests you have in there, so maybe there's a few that you'd like to speak to and highlight. But I, I definitely would like to, to. To zone in on that one as we go through our conversation here.

Sure. Where do you, where do you want to start? You want to start? So the specific asks were around basically the fintrac reporting and.

Yeah.

Not being allowed to basically close people's accounts for political donations. The second ask was around this, this B15. And basically. Hey, pay attention. This is a potential real whirlwind coming towards you.

Buy a calculator.

Yeah. And potentially they didn't want to listen to me because we're. Even though we're considered a large credit union, we're not a very big player in the grand scheme of things.

Yeah. The size of the lobby, it doesn't weigh enough. Right. For somebody to say, hold on a second, like we got to pay attention because this is going to cost us a lot of votes if we don't.

Correct. Yeah. So that probably had some sway. And the third ask was around recognizing gold and silver as a currency rather than a commodity. Currently in the Alberta Credit Union act, the precious metals, gold and silver are considered commodities. You know, rightly so they probably could be. And we disagreed with that fact. We thought that they should be valued as a currency at fair market value. A number of reasons for that. New Basel III laws came out that, that stated such. It's traded daily. It's a very liquid asset. It's recognized worldwide. So there's a number of things that sort of pointed in the direction that it could be accommodated as a currency. The, the minister or the regulators disagreed with that, which is fine. But we are allowed to hold it as a true face value currency. So if anybody's ever looked at a gold coin, it has a $50 face value if it's from the Royal Canadian Mint. And so we can carry it on our balance sheet at face value. But that's a significant markdown from the fair market value, which today is nudging up against $2,700 an ounce, which is an interesting story in itself that at one point somebody thought a 1oz cold coin was worth $50. Today the market value is worth 2700, but that's sort of a different story.

And is the balance sheet tallied up and segmented the same way, like in terms of tier 1 capital, total capital, all of that from a reporting, a reporting and accumulation requirement?

I would love that if we were more on the standard of the Basel standards, where we can count precious metals as a Tier one equivalent to cash as capital? Unfortunately, no, they force us to write it down. And so we carry it on our balance sheet at that $50 face value versus that 2,700. So in a way, our balance sheet is significantly stronger than it looks on paper because we do have precious metals within our control.

Now, one of the reasons that's important and the push for that and the ask, of course that you recommended basically to the Alberta government to be able to carry it at that fair market value is obviously just what it looks like on their balance sheet, of course, being one. But then the concept or the idea of going back to a much more traditional methodology of banking where, you know, a dollar could be pegged to something of physical value, such as gold or silver. And, you know, that is kind of the, the general premise, I think, of what direction you were looking to go down. And now there may be some challenges in creating such a thing. So if, if any institution in Canada presently today wanted to go about doing that, what are some of the difficulties and challenges that they would face in trying to make that a reality?

Well, part of it is the government would be working against you. Their superpower, if you will, is the ability to create money out of thin air, create currency out of thin air. As soon as you peg it to something tangible, that superpower goes away. And I could go down and ask much of the world's problems today or as a result of the government being able to print currency, but we'll potentially save that for another time. But that's probably your biggest challenge is you're going to have the government standing in your way to be able to do that. Number two, as an organization we can't back or deposits 100% with precious metals because as a financial institution we need to be able to pay for our bills and pay for staff and pay for it and that type of thing. And that's all paid in fiat currency. We need to be able to make a profit on what we're doing. So we can't just be strictly a bullion bank where you're basically taking fiat and buy gold with it, that type of thing. So that's probably the next biggest problem that you're going to run into. That's probably enough to stop the whole process. So yeah.

And so where do you see Bow Valley Credit Union in the next five to 10 years? What's really exciting you around some of the developments that you've got in the business plan for the credit union?

Yeah, well we have some significant themes around precious metals. We have a partnership with Silver Gold Bull. They're they're Canadian wide dealer. They also deal in the US the one of the biggest in Canada. And with through their partnership we do retail sales of gold and silver, buying and selling silver as well as storage. They have a storage facility right within Calgary which we like. They're from Alberta, they grew up in Alberta. They're vested in Alberta. We like that as well. Along those same lines, not only are we trying to help people get protected from inflation and devaluation of currency through physical precious metals, but we're in the late throes of developing a program where you can actually lend against your precious metals. So it almost works like a home equity line of credit where you basically have say $10,000 worth of gold value, you have it in storage, oops, the furnace blew up. I need $5,000. You can borrow against your precious metals and actually use fiat currency and almost leverage your position to some degree. Which generally people in the gold and silver precious metals space do not want to get rid of their precious metals. So this is a significant advantage for them. In addition, about a quarter away from launching our gold backed deposits where you can actually deposit fiat currency. And there's no downside to it because you're guaranteed on that and you get paid interest on your fiat currency. But you can also take advantage if the price of precious metals goes up. So it basically works as a fiat currency inflation hedge, if you will, for people that want to carry some fiat currency.

Very Interesting.

Yeah. We think there's a particular big amount of interest around that and that would.

Increase your capital reserves as well, which is one of the things that you're looking to do if you can increase your deposits from that standpoint.

Correct. Yeah. And that's the bigger we get as an organization, the more capital we need, the more locations that we want, the more capital. And it all goes towards that. And so it comes in mainly in two different ways. Either through profitability, as mentioned just previously, or through common shares. People can actually purchase more common shares within our organization to allow us to expand. And that's been a big theme of ours lately, is getting to more regions of Alberta because we just find a huge amount of Albertans wanting and needing our service and our value set around this and to be able to do that, the capital to. To expand. So very, very good.

And at, you know, again on your team. So what are you most proud of in terms of, you know, community involvement, things that the Bow Valley Credit Union is really passionate about. And what bright light do you want to shine on your team?

Sure. I think they're a fantastic team and they've worked exceptionally hard over the last even just 18 months has been very impressive to see and I think been very happy with that and I think instilled with within every member of our organization is a particular value set. And that value set is, like I like to say, is very agnostic to just about anything. So politically agnostic, health agnostic, religious agnostic. And I think it's been very interesting, let's say, over the past number of years, where particular number of organizations virtue signal in spaces where they frankly don't belong. We're not here to do that. We're not health experts. So therefore we're not going to dictate to you what you should do as a health standard. We're not political experts, so therefore we're not going to dictate to you what political advice we should give. We're. We're here for a financial service, maybe a little economics, but that's about it. So.

Spells freedom to me.

Speaking of the, the economics and, and thinking about leverage, you know, with, with the institutions, at least in Canada. We talked about this a little bit before we hit the record button. You know, other institutions in Canada have a certain degree of leverage that can be created based on deposits that exist. And there's a pretty distinctual difference. You were identifying between the credit unions versus, you know, the traditional commercial banks, at least in Canada. Can you expand on that a little bit? For our listeners.

Sure. You know, so as mentioned, capital is king. We need capital for everything we do. So you'll find that organizations that are over leveraged will definitely have a capital multiple much higher. So in traditional Schedule 1 banks in Canada, they can go to a maximum about 23 times their capital. And us as an organization, typically like to keep it around 8, 8.5%. So significantly less leveraged than other financial institutions. And just to give you a bit of a scope, like Leanman Brothers, when they blew up and 2008, they were leveraged 100 to 1. So that's sort of where you can get with, with your leverage and it can cause significant problems if you are leveraged, as we likely all experienced in our lives. Yeah.

Especially if capital stops moving.

Correct. Yeah.

And which, you know, again, the financial crisis, you know, you had CEOs of some of the largest corporations in, in America getting on the horn with the Federal Reserve and saying, unless you get credit and capital moving, I can't buy raw materials, I can't pay the bills, I can't really do anything other than turn the lights off in the business. And I don't think people really, truly had a really clear indication of just how close to the brink the financial system was to collapsing. And there's a really great movie that we like to reference. It's titled Too Big to Fail. And there were conversations going on leading up to the precipice of that, and these folks in Washington were saying, the American public has no idea what's about to happen.

Yeah, yeah. And you're bang on. It's not like bills weren't getting paid and things weren't happening. It's basically just that credit stopped. Yeah. And so when, when that happens, then there's. There's going to be a cascading waterfall effect.

Definitely. Definitely. This was a lot of fun. Rich, take us home.

Well, Brett, we gotta say I really appreciate you coming in to, to share a unique knowledge that you have both about the banking industry and what currently is being faced by the Canadian population, at least. And of course, for our American friends listening in, I'm sure they'll be curious to find out what's happening on their own home soil. And, you know, with the challenges you've identified. And, you know, again, I got to see the letter that you sent to the Minister of Finance. You know, you, you may not have been wearing a superhero cape when you wrote that letter and plans to send it to the government to let them know what changes you'd be recommending, but You. You are showing up to a Canadian citizen, at least to Albertans, as a bit of a hero by taking a stance and. And finding ways to create more freedom in banking for them as citizenry. So we really appreciate that. And so our question for you, Red, is who would you most like to be a hero to?

You know, a big part of this, I. I got. I don't get angry much in my life, but I was pretty angry throughout when. When my kids weren't able to go to hockey and things were taken away from their. Their youth. So a large part of what I'm trying to do is just make sure that the freedoms that we enjoy today passed or continued going forward, because I think we have a really slippery slope and go down a very dark path if we're not very careful.

So agree 1000%. Brett, it was just a real pleasure to have you and thank you. Thank you for your advocacy again and the work that you're doing there to. To be a voice and. And to be a voice of logic, which is largely absent out there nowadays. And so thank you for. For doing that on behalf of Albertans and by proxy Canadians, because we're such a large contributor to the health of the Canadian economy. And so we appreciate you. Thank you for being generous with your time and your knowledge, and we look forward to having you back. And we'll pick up the conversation on some of the things we were discussing before hitting the record button as well. And for all of our YouTube listeners and viewers, you just saw another video come up on the playlist, thanks to our amazing editing team. The reason we do that is there's no such thing as having arrived at knowledge. There's always something new to learn. So we've recommended the next video that we would like for you to view and to continue your journey of learning. So, gentlemen, this was a lot of fun. Make the rest of your week outstanding, and thanks again.

Thanks, Brett.

Thanks.