As far as Vancouver corporate shuffles go, this was a biggie.
On May 13, Canada’s largest credit union, Vancity, announced that its popular president and CEO, Tamara Vrooman, would be leaving on June 30 to become president and CEO of the Vancouver Airport Authority.
Vrooman, a former B.C. deputy minister of finance, has been heading Vancity since 2007. And she chose to resign in the midst of a COVID-19 pandemic that has inflicted serious financial pain on some of its 543,000 members.
When Vrooman was reached by phone, the Straight asked what she would say to anyone who might wonder about Vancity’s financial stability in these uncertain times.
“Thankfully, we’re in a really good spot, notwithstanding the obvious and significant external events,” Vrooman responded. “If I thought for a minute it wasn’t, I wouldn’t make this change.”
Credit unions are chartered by the provincial government, which has issued a blanket guarantee on all deposits, regardless of whether the member lives in B.C.
She pointed out that during the financial crisis of 2008, Canadians, through their governments, took on more debt to help build up the balance sheets, liquidity, and capital of provincially regulated credit unions and federally regulated banks.
“Banks and credit unions in Canada enter this period with very, very strong balance sheets—strong liquidity and strong capital—largely because of the support that Canadians have given our sector over the last decade as we’ve recovered from the financial crisis,” Vrooman explained. “So, we’ve come into this situation with COVID-19 very, very strong.”
To inject more funds into the local economy in March, Vancity created a one-year, nonredeemable “Unity Term Deposit” with a three percent interest rate. By early April, it had completed 3,898 loan deferrals, including mortgages.
In April, Vancity also temporarily cut credit-card interest rates to zero percent for those whose livelihoods were disrupted by COVID-19.
“Our folks have done the right thing when it has mattered most to people, regardless of whether it was the thing that other people were doing,” Vrooman said. “I’m most proud of the fact that we really have shown that putting people at the heart of the business model is not antithetical to strong business. It’s essential to it.”
From the last annual report, it appears as though 2019 was a tough though not terrible year for Vancity. Membership increased by 1.8 percent and assets rose 1.2 percent. It oversees $28.2 billion in assets and assets under management.
Last year, lower rates on loans and intense competition for deposits resulted in a fall in the net-interest margin from two percent to 1.9 percent. That lowered Vancity's bottom line by $15.2 million according to the annual report.
“The housing market cooled significantly over the first half of the year,” it stated. “With the majority of Vancity’s loans being linked to housing, these factors had a material impact on our 2019 net income, which was $610 million.”
The liquidity ratio, which measures Vancity’s ability to pay current liabilities within one year, fell slightly in 2019 to 13.1 percent from 13.4 percent the previous year. It's now at the second-lowest percentage in five years.
But the capital adequacy ratio—measuring a financial institution’s capital as a percentage of risk-weighted credit exposures—was 14.7 percent in 2019. That’s significantly higher than the ratio of 13.3 percent five years ago.
In comparison, Canada's largest financial institution, the Royal Bank of Canada, had a considerably lower capital adequacy ratio of 13.2 percent in 2019. BMO's was even lower at 11.4 percent.
That could put Vancity on a solid financial footing, notwithstanding a stark warning this month from the U.S. Federal Reserve about the potential for “outsized drops in asset prices”, including stocks.
"Many financial institutions raise funds from the public with a commitment to return their investors' money on short notice, but those institutions then invest much of the funds in illiquid assets that are hard to sell quickly or in assets that have a long maturity," the Fed’s May 15 Financial Stability Report states.
"This liquidity and maturity transformation can create an incentive for investors to withdraw funds quickly in adverse situations," the report adds. "Facing a run, financial institutions may need to sell assets quickly at 'fire sale' prices, thereby incurring substantial losses and potentially even becoming insolvent."
Central bankers around the world have tried to mitigate this risk by boosting requirements for more liquidity and higher-quality capital, as well as by imposing new stress-testing regimes.
Vrooman remains upbeat about the future of credit unions.
“I think if you look right across credit unions in British Columbia and certainly right across the country, you’ll see that liquidity is actually up, showing the confidence that their members have in the credit union model, which has always been about members helping members, in particular in times of need,” she said. “I actually see more members in more communities understand the value of their credit union and coming toward it. Credit unions are in a good position to help communities weather this storm.”
Sustainability on Vrooman's YVR agenda
As for her future plans at YVR, Vrooman mentioned the possibility of retrofitting the large main building to make it more sustainable.
She even raised the prospect of creating a circular economy at YVR, in which waste is eliminated and everything is reused or recycled.
“We need to help our airline partners in every way we can as they’re also looking to ways to reduce the amount of carbon in their contribution,” Vrooman said. “As an airport, we can do a lot to help our partners.”
YVR’s annual revenue in 2018 was $565.1 million. There were 25.9 million passengers that year and 296,000 runway takeoffs and landings, as well as 338.2 thousand tonnes of cargo moving through YVR.
It's hard to see how those numbers could be matched this year, considering how airline travel has been affected by the pandemic. In April, CNN reported that the number of people travelling by air had fallen by about 96 percent.
Does this mean that YVR will try to generate more revenue from its vast land holdings—and even get into the business of residential real estate development?
Vrooman didn't directly answer that question. Instead, she emphasized that one of YVR’s partners is the Musqueam Indian Band. (It won’t refer to itself as the “Musqueam First Nation” until it’s freed from the shackles of the Indian Act.)
And Vrooman said that she will try to understand the Musqueam people's thoughts about the future of the land base, as well as learning more about the needs of local, community, and stakeholder organizations.
“I’ll be looking forward to the briefings in terms of what the plans are for that land base, but it does need to first and foremost serve the primary function of the airport, I believe,” she stated.
In 2019, Vrooman was paid a base salary of $487,446 as Vancity’s CEO. She also received a short-term incentive payment of $214,077 and a long-term incentive of $348,629, bringing her total pay package to $1.05 million.
Vancouver Airport Authority revealed in its 2018 annual and sustainability report that its base salary range for the president and CEO in 2018 was $388,000 to $582,200.
The CEO could add another 75 percent to the base salary under the short-term incentive plan, and another 30 percent under the long-term incentive plan.
“Under both the short and long-term incentive programs, actual performance results measures against the various metrics determine the payouts,” the airport authority stated.
So, is Vrooman going to get a salary increase by working for the airport authority? She wouldn’t say.
"I believe it will be released once it's actually paid," she said.
Since 2011, Vrooman has been on the board of the airport authority as the City of Vancouver's representative. She absented herself from the board's discussion over who should replace Craig Richmond as the president and CEO.
Her experience as a director prompted the Straight to ask which board is more meddlesome—Vancity’s or YVR’s.
“I think that depends on where you stand depends on where you sit,” Vrooman quipped. “So maybe I’ll answer that after I’ve been CEO at YVR for a year or two.”