TO:Tamara Vrooman, CEO
FROM:Véronique Lafond, Executive Assistant to the CEO
DATE:April 27, 2009
RE:Credit Line Portfolio
Vancity is faced with an expected shortfall of $24 million if we do not reprice our line of credit portfolio. We must decide what actions to take to ensure our own financial viability and meet our members’ expectations while adhering to our Statement of Values and Commitments.
We should reprice our line of credit offerings. This will be seen as an unfavourable decision by our members but is a decision that we must make with confidence.
In the wake of the 2008 financial crisis we find ourselves at a crossroads. As you know, the spread between our deposit interest rate and the rate on our lines of credit has narrowed to levels never seen before. We are now expecting a potential shortfall of $24 million on existing outstanding loans, or as much as $45 million should our customers choose to draw down their credit lines.
We must take action to prevent any expected shortfalls all the while keeping in mind where we stand as a company and the obligations we owe to our members and our community.
There are many alternatives available to you and ultimately it will be your decision. I have offered six alternatives for your consideration which are discussed below.
This alternative is likely the favourite among our members as it has little or no immediate impact on them. Our members would continue to enjoy low interest rates on their existing and future lines of credit. This option however would all but guarantee a shortfall of at least $24 million for the company and would for us to fund these loans at the expense of other member needs. You should reject this option.
Call the lines of credit
Our second alternative is to cancel all existing lines of credit. This would help mitigate the $24 million shortfall, but would be disastrous...