Canada CUs' Similarities, Differences Offer Lessons For U.S. Counterparts

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America's credit unions are Canadian immigrants, and that country's CU community remains closest in operations and scope to those in the U.S. As thousands flock to Canada for NAFCU's annual meeting. Here's a look at the Canadian system, which has been more successful at penetrating the population.

Thirteen percent of Canadians use a credit union as their primary financial institution, and an impressive one-in-three Canadians belongs to a credit union, according to Credit Union Central of Canada, and that's just among the first of the differences (and similarities) between the two movements.

At first blush, it seems an easy enough task to compare the two system's differences, although many Canadian officials contacted to answer questions for this story did not return repeated phone calls seeking comment.

The 100-year-old Canadian CU system has assets of $72.1 Billion (total consumer, mortgage and business loans) and 21,000 employees. Yet the banking industry in Canada is still king (just like in America), commanding some 68% of the market.

One critical competitive difference for Canada's credit unions: there are just five national banks that dominate the landscape. Another important contrast to the U.S.: Canada actually has two credit union movements, with the Caisse Populaires operating in French-speaking Quebec.

The organization of trade associations/corporates in Canada is also different from the way the system has been established in the U.S. Credit Union Central of Canada ("Canadian Central") represents credit unions in all provinces except Quebec. At best estimate then, Canada's credit union movement consists of some 820 credit unions and 1,351 caisses populaires. Taken together, they have more than 3,700 locations and almost 3,200 ATMs (in Canada, the machines are called ABMs, for automated banking machines.

There are nine provincial Centrals and they, in turn are the primary shareholder/members of Canadian Central. When membership statistics from Quebec's separately governed caisses populaires are added, about one in every three Canadians is a member of a credit union or a caisse populaire.

Enter the French

In Quebec, vive la difference seems the rule. Each caisse populaire was organized into eleven federations, which in turn belong to the province-wide confederation, the Confederation des caisses populaires et d'economie Desjardins du Quebec (Desjardins).

They were reorganized in 1999, when the member caisses of ten federations approved a plan to amalgamate their federations and the confederation into a single new federation, to which each individual caisse would belong. That plan went into effect in July 2001. The caisse populaire federations in Manitoba, New Brunswick and Ontario are also affiliated with Desjardins. According to the Desjardins website ( Desjardins is Canada's largest financial cooperative group, with assets surpassing $100 billion and has more than 5 million members.

Desjardins speaks of the same high social values as do CUs in America and worldwide. "We set ourselves apart from the crowd of profit-driven financial services groups that have to answer to their shareholders, because we are guided by the values of humanity, cooperation, equity, solidarity, honesty and social responsibility," the organization says on its website. "That's the Desjardins difference. We put money to work for people, never the other way around."

They have a tidy market share and the staunchest loyalty, perhaps as a result of that very strong branding, claiming to be "the undisputed leader of the Qu?bec market, where 75% of the active population does business with Desjardins." So, credit union and caisse populaire membership across Canada totals about 10 million or nearly 33% of Canada's population.

The Canadian system also favors innovation and product development, leading the way to install ABMs, direct payroll, debit cards and so on, and has contributed mightily to the international CU movement as well. Desjardins has an organization, Developpement international Desjardins, dedicated exclusively to help organize credit unions in other countries, particularly Asia, Eastern Europe and the former USSR.

So in basic structure, CUs on both sides of the border look alike. But they are not regulated alike. All credit unions (including caisses populaires) are provincially incorporated (we say chartered) and regulated at the provincial level, but the federal government of Canada plays a regulatory role through the centrals.

Canadian Central is chartered and regulated by the federal government, which provides liquidity through the Bank of Canada or the Canada Deposit Insurance Corporation (CDIC). In addition, the provincial centrals in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario and Nova Scotia have chosen to register under both federal and provincial legislation.

The legislative and regulatory framework for credit unions and caisses populaires parallels that of federal financial institutions, according to CUCC, such as banks, and the provinces provide deposit insurance for members of both.

Canadian credit unions pay corporate taxes, while in America, they have a federal exemption. It's not easy to compare that difference, because the tax treatment of credit unions' main competition is also different than it is here in America. So, a possible banker trade argument that reasons if CUs in Canada can succeed while paying taxes, then they can also do it in the United States must also include the differences in how banks are treated (and that's another story).

The banking system in Canada is different. There are fewer than six national banks. And credit unions are prohibited from crossing provincial boundaries. So there are no multi-state fields-of-membership like some federal CUs in America have, and there are no true international FOMs, like Navy FCU, for example.

Another unique arrangement is that "corporate interlocks" exist between the trade groups and corporate central, while in America, former NCUA Chairman Norman E. D'Amours had them vanquished through regulatory fiat.


The history and growth of Canadian CUs is rich. Beginning in the early 1900s, ordinary working people (what the FCU Act of 1934 called "people of modest means") had little access to the commercially centered banks while the country still had vast agricultural and sparsely populated land-areas that weren't typically served by the banks.

The first credit union was established in December 1900 in Levi, Quebec when 80 people joined the first caisse populaire.

In the 1920s, credit unions were opened in Ontario and the western provinces. In 1932, the first credit union in Nova Scotia was incorporated in Reserve Mines. In the late 1930s, credit unions to serve farmers opened in the Prairies, and in the 1940s, credit unions were established throughout Canada.

Most centrals were formed in the 1940s as well, with CUCC being incorporated by a special act of Parliament in 1953.

So, the three-tier system (excluding Quebec) of local, provincial and national is not unrecognizable to the American CU structure. The belief system and purpose remains common to both countries, with credit unions operating independently; joining a corporate; being insured by a government entity (an exception here for the private share insurance option, where available in America) and competing with banks and each other to provide member services.

The provincial central, not unlike the US state league structure, offers financial services, government relations and support services.

So for everything that's different, there's more than a touch of the familiar.

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