The second largest alternative lender in Canada has announced plans to apply for a bank charter.

Equitable Trust says becoming a bank will “support the development of the business, promote efficiencies, appeal to a new generation of borrowers and depositors, and may provide advantages in raising capital” (i.e., lower Equitable’s mortgage funding costs).

The company adds that the conversion would have “no impact on” its current business model—which largely consists of single-family non-prime mortgage mortgages and commercial lending.

Bank approvals don’t happen overnight, however. The Office of the Superintendent of Financial Institutions (OSFI) tells us:

“In the past 5 years, 9 institutions received approval to commence operation as a federally regulated bank or trust company.  On average, the approval was obtained approximately 20 months after the date the application was submitted.”

The most recent trust-to-bank conversion was B2B Bank (formerly B2B Trust). Its application took two years.

Rating agency DBRS says the conversion “will simplify regulatory compliance slightly as the change would place ‘Equitable Bank’ under federal OSFI regulation, rather than the current dual federal and provincial regulation.”

Last modified: April 26, 2017