The rush to merge is upon us and there is no real ‘end game’.
Credit unions were conceived as locally controlled alternatives to large banks (finance companies and loan sharks). Credit unions were co-operative projects of local groups to provide their members with access to credit at fair prices. But over time the business model expanded to include mortgage lending, business lending, insurance retailing, and wealth management. Some credit unions created affiliated community foundations.
But the ‘local’ nature of credit unions peaked more than thirty years ago.
In this period, the total number of credit unions in Canada has contracted considerably, shrinking from 1,421 in 1989 to only 184 last year. Meanwhile, the volume of assets they manage has increased tenfold, reaching roughly $315 billion in 2024.
(Corporate Knights)
Consolidation continues at an even faster pace in 2025. The British Columbia credit union system will likely lose 7 more credit unions over the course of the year. Reducing the number of BC incorporated credit unions to @20. Many speculate that BC will only have six or eight provincially regulated credit unions within two or three years. (See mergers CCSC.) But will it end there?
Recent and pending mergers include: Blue Shore and Beem; Compensation Employees and Beem; Summerland, Osoyoos and Revelstoke; Integris and Coastal Community; Prospera, Coast Capital, Sunshine Coast.
Locally Owned and Operated?
Consolidation takes ownership and control away from local communities. This is the reality, despite assurances to the contrary.
Wellington Holbrook, Vancity’s CEO, was effusive on recently clearing a regulatory hurdle for a pending merger with First Credit Union. “It validates our shared belief in the future of community banking, and that this new model means we can better serve the people who count on us, support local economies and build a better world. We are excited to move forward to the member vote and to build a future where cooperative values thrive.” (National Law Review)
These grand words do not change the fact that ownership will no longer be local. First Credit Union’s 15,000 members will have almost no influence within the total Vancity membership of @580,000. And decisions on the “future of community banking” in Powell River will be determined elsewhere.
To be frank, these mergers are not driven by members, they are largely driven by managers and economics. Mergers provide managers the most attractive path to career growth; better compensation, and enhanced status. This is a better option also due to aging credit union memberships and boomer retirements.
Yes, economies of scale can be achieved, especially with IT costs. But, these could be tolerated if local democratic ownership was valued. However, the question of ownership is usually side-stepped, or down-played, in most merger communications (see powerthefuture.ca).
The consolidation trend is now well established nationally and Deloitte has even designed a special service package for credit union M&A’s.
This merger frenzy does have limits however. The number of potential acquisition targets or merger partners is declining.
Prospect List?
Recently the Canadian Credit Union Association CEO was pressing for ‘extra-provincial’ credit unions. He argues that “most credit unions remain confined to operating in a single province.” This is not exactly true. While provincial laws preclude doing business outside the province, there are work-a-rounds. As he notes; three large credit unions have been continued as ‘federal credit unions’ under the Bank Act. Federal credit unions may offer services in any province or territory. As well, Vancity and Alterna have subsidiary banks operating in other provinces.
The CCUA is simply pursuing a strategy of regulatory arbitrage. They are seeking more favourable terms from provincial governments compared to those now available under federal legislation. Provincial governments would need to enter into bilateral agreements to enable ‘extra-provincial’ business activity.
Notably, any such inter-provincial agreement would likely enhance the dwindling pool of potential merger partners. I suggest this is the biggest reason for the CCUA to advance this proposal at this time. But each province will have to assess the risk of losing their own provincially based operators in such a scenario.
Too Big To Fail?
The evolution of very large ‘consolidated’ credit unions creates something new; a handful of CU’s in BC rather than a hundred. These will be complex ‘near banks’. In the BC system, governance, regulatory, and deposit insurance risks will be highly concentrated.
We have a consolidation conundrum. At scale, the co-operative ownership model falters. Regulatory regimes are tested. As well, the large pools of accumulated capital in these credit unions are likely to attract attention from those who can gain from demutualization. These are issues I plan to explore in upcoming posts.