Credits unions
Credit unions are chartered under provincial legislation. Provincial supervision consists of the required filing of financial statements with the appropriate provincial regulatory authority, the imposition of certain liquidity tests and certain minimum reserves, the requirement to belong to a provincial deposit protection fund, examination by provincial government and deposit protection fund examiners, and the restriction of the type and amounts of loans and investments that can be made.
Some credit unions have become financial super markets that compete with the banks. These credit unions allow their members to deposit money, invest in term deposits, use a variety of personal checking accounts that pay interest, purchase tax-deferred savings plan contracts, obtain personal and mortgage loans, and purchase insurance.
The ten largest credit unions are listed here below:
1 Confederation caisses populaires Desjardins
2 Vancouver City Savings Credit Union
3 Credit Union Central of Saskatchewan
4 British Columbia Central Credit Union
5 Canadian Co-operative Credit Society
6 Ontario Credit Union League
7 Surrey Credit Union
8 Pacific Coast Savings Credit Union
9 Civil Service Co-operative Credit Society
10 Capital City Savings Credit Union
During the late 1800s, Canadian banks accepted savings from all groups and lent money only to some. Since farmers, fishermen, tradesmen, and laborers had no access to other credit granting institutions, they borrowed from money lenders who often charged usurious interest rates.
In 1900, Alphonse Desjardins established the first caisse populaire in Levis, Quebec. The caisse populaire operated within the geographic boundaries of the parish, where people would be prepared to be of mutual assistance to those they knew. Because members had limited liability, non members were reluctant to lend funds to the caisse. In the period before World War I and in the 1920s, Desjardins and his supporters were unsuccessful in their attempts to place credit unions under federal legislation.
In the 1920s, Desjardins assisted the organization of credit unions in the United States. The U.S. credit unions differed from the Quebec caisses populaires in two respects. First, their members were usually linked by a social or occupational bond and not a parish bond. Second, they were prepared to lend to a wider constituency.
In 1928, St. Francis Xavier University in Antigonish Nova Scotia began a program of co-operative education through study groups in small communities. Community credit unions evolved from these study groups and were based on similarity of needs. These cooperative lent to individual members, businesses, and other co-operatives.
In the 1920s, Western Canada was still in the relatively early stages of economic development. Farmers and fishermen required short-term credit for working capital and long-term credit to purchase fixed assets. Since the lending policies of the banks did not meet these needs, the need for locally based and locally responsive money sources was evident. Thus in the spirit of cooperation, the forerunner of the present western-based credit union system was developed.
After World War II and particularly in the early 1960s, the assets of trust companies grew rapidly as they introduced new products, such as pooled pension funds and mutual funds. Trust companies, like credit unions, offered longer branch hours and more attractive savings instruments than the chartered banks. Prior to the 1967 Bank Act revision, banks faced an interest rate ceiling of 6% on deposits similar to Regulation Q in the United States. However, trust companies were not governed by this restriction.
Prior to the 1967 revision of the Bank Act, which opened up personal loans and mortgages to chartered banks, credit unions experienced asset growth faster than the growth rate of the population. Credit unions utilized their affinity ties with their customers to compete very effectively with finance companies for consumer loan business, and with banks and trust companies for retail deposits.
Since 1967, credit unions lost market share in the battle for intermediation business, although some credit unions, such as the Caisse Populaire Desjardins, are comparable in size to the large banks and trust companies. In the 1970s, credit unions began to purchase shares in banks and insurance companies and began to expand into insurance, banking, and trust activities.
Between 1967 and 1981, changes generated growth in the market share of banks relative to finance companies and life insurance companies. Trust companies experienced dramatic growth by being first in the introduction of new products, aggressive marketing, and having longer hours of service, in order to capture a larger share of the retail banking market. By 1980, trust companies had become the main competition for banks. The 1980 Bank Act strengthened the competitive position of trust companies and credit unions by granting them access to check-clearing facilities through the Canada Payments system.
The credit unions in the western provinces retrenched during 1984-1986, and grew again in 1987-1988. Consolidation shrunk the number of credit unions in British Columbia to 118 with 280 branches in early 1989 from 136 with 314 branches five years earlier. During 1988, the Quebec government passed legislation that allowed the Caisse Populaires Desjardins to sell insurance directly to the public through its branches.
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