Divided Allegiance (CCUA)

The Canadian Credit Union Association (CCUA) is conflicted. It says that it champions the successful future of (a) provincial credit unions and (b) federal credit unions, but it is not that simple. Unfortunately,
a federal credit union growth strategy is based upon cannibalising the provincial credit union systems.

In this last year the CCUA assumed responsibility for the ‘government relations’ program in BC, formerly directed by Central 1. So, the CCUA is the primary lobbyist in Victoria for BC credit unions.

The CCUA continues to be the primary lobbyist for credit unions in Ottawa, where it champions the federal credit union designation under the Bank Act. Coast Capital Savings is the first BC credit union to convert to be a federal credit union (or co-op bank). The CCUA made it clear to me that Coast Capital is openly courting mergers and acquisitions.

So, which future is the CCUA really pursuing?

I was not the only one wondering why Coast Capital was invited to participate last week in Victoria, for Credit Union Advocacy Day. Provincial legislation no longer applies to Coast; but it does apply to provincial credit unions – their competitors (and potential prey). The primary focus of discussions with legislators was proposed changes to the BC regulatory regime.

In conversations one issue did arise that was enlightening. It appears that Coast would like changes to BC legislation that would make it easier for federal credit unions to merge with provincial credit unions. This is not on the list of priorities for BC credit unions.

But beyond that, federal credit unions have a contrary interest to provincial credit unions when it comes to the BC Financial Institutions Act. A ‘co-op bank’ does not want BC credit unions to have any ‘advantage’ for being local, or for being responsive to provincial priorities. The metaphor of a fox in the hen house came to mind.

The CCUA asserts that all credit unions are CCUA ‘members’. This obscures the conflict, it does not address it. To boot, CCUA is proposing to scale back dues demands and adopt a ‘fee for service’ model for many ancillary activities (which are not used by large credit unions). It would appear that the CCUA is betting on the ascendance of federal credit unions.

BC credit unions have to assert their own interests. Reliance on the CCUA may not ensure the best results.

2 thoughts on “Divided Allegiance (CCUA)

  1. Hi Ross, just wondering if you feel there is already an issue with big provincial CUs cannibalizing smaller ones, and if the entry of federal CUs is just exacerbating an existing problem?

    • Yes Larry, the differing business models exist at the provincial level too, perhaps termed niche market and regional market strategies. And the interests of the larger credit unions may have dominated in recent years with consolidation. The federal credit union model introduces more complexity. Three or four other credit unions in Canada are moving to go federal. Locally owned and democratically controlled credit unions will need to have a regulatory system that will allow them to be competitive, and thrive. Microeconomics notes a tendency for large players in a market to absorb smaller competitors and build an oligopoly or monopoly – to maximise the economic rents that they can extract. This federal credit union option follows that trend. Public policy should counter that; encourage competition, innovation and new entrants. Ross

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