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First West Credit Union staging member vote next month to continue as a federal credit union
October 9, 2021
9:34 am
Doug
British Columbia, Canada
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According to this regulatory notice, First West Credit Union's board evaluation of migrating their provincial incorporation in British Columbia to federal jurisdiction appears to have progressed to a member vote, to be held next month. Assuming members assent to the move, as appears likely and which will likely be held virtually and have a very low turnout, First West Credit Union would then be one step closer to continuing as a federal credit union. First West operates under the banners of Envision Financial, Island Savings, Valley First, and Enderby & District Financial, though the latter was quietly reorganized as part of the Valley First division and online banking platform. Assuming the Minister of Finance and OSFI superintendent consent to the continuation, demand deposits would be carry with them an unlimited CDIC guarantee for six months from the date of continuation, and term deposits would carry with them an unlimited CDIC guarantee until maturity.

My main concern is that with two of the largest B.C. credit unions leaving (one has already left) the B.C. system is to what effect this will have on the overall health of the B.C. system. I suspect CUDIC premiums to B.C. institutions will have to go up, or there could be changes to CUDIC coverage.

Of note, Innovation Credit Union has all the approvals it needs to continue as a federal credit union, but still has not been given Minister of Finance and OSFI approval. It is more than two years behind schedule. I tend to think the delays are government bureaucracy-related than anything institution-related, which is another reason I'm now less inclined to favour federal continuance.

Interestingly, you can already become an Innovation member, whilst Coast Capital Savings is several years a federal credit union and still does not advertise its services outside of British Columbia, which suggests an organization-specific issue.

Astute observers may wish to view their proposed bylaw amendments:

https://www.keepgrowing.ca/download-centre/

Of note, they do not intend to expand their branch network outside of B.C. organically, as with Coast Capital, but they are looking to have discussions with interested out of province credit unions by providing an ostensibly easier path for those credit unions to escape from provincial jurisdiction. It's notable, though, that Coast Capital Savings hasn't even launched digitally outside of B.C., except for some off the record, non-advertised exceptions, and has not had a successful merger with an out of B.C. provincial credit union, so it remains to be seen whether First West will have any more success.

Cheers,
Doug

October 9, 2021
7:20 pm
Loonie
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I'm not in BC and have no connection to this CU, so I 'm not going to read the blurb, but my enduring question is "why?'" I didn't understand it with CC and I don't understand it now. Perhaps there was an explanation earlier that didn't sink into my brain.

As a CU consumer/member, I don't see it as a good sign when they give up their more generous deposit insurance and trade it for only 100,000. I don't want this to become a trend! And, yes, it could undermine the pool.

I think that at this time, although heel dragging may be governmental, we have to make allowances as so many things have been slowed due to covid.
A few months ago spouse asked when CPP pension payments would reflect 2020 contributions and was told it would probably take 18 months! The implication was that this long delay was due to covid. Why it should take any time at all is beyond me as it should all be computerized, but there you have it! We eagerly await that extra ten or twenty bucks a month - and just think of all that backpay!sf-winksf-laugh

October 10, 2021
6:35 am
AltaRed
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Even though I am not a CU member of any kind, the model and the 20+ years of consolidations intrigues me to so I follow it to some degree. From some of the articles/white papers I have read, at least a few provincial regulars have been studying the increasing potential instability caused by both large amalgamations and/or CUs going federal CDIC. The fear may be more from the provincial (taxpayer) backup exposure if the deposit insurance entity runs out of money on a large CU insolvency. Logic would suggest the exposure is increasing but is it primarily a very marginal concern?

As far as going federal, it is also unclear to me what is to be gained, at least in the short term. However, this may be a case of hedging one's bets of the potential major disruptions that could come when and if Open Banking comes, causing depositors to be able to move among FIs like between supermarkets. We know some big CUs have established CDIC insured banking subsidiaries as another method to stay relevant outside their market area. Being caught asleep at the wheel will not result in being survivors.

Lastly, some articles/white papers on the future of CUs suggest it is the middle that is being (and will continue to be) hollowed out, becoming irrelevant. Either have to go big, or remain a niche local enterprise. The amalgamations are not likely to go away any time soon.

October 10, 2021
8:30 am
Loonie
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I take your points, AltaRed.

What would be the thinking behind the idea that very big or very small is the most survivable? In the past, you seem to have suggested that very small was not going to last.

I think the jury is still out on the impact of Open Banking. We are creatures of habit in banking, it seems, to a large extent. Just because we can doesn't mean we will. I live in a busy urban area and have my choice of grocery stores, banks and CUs of all stripes, but in fact I go to the same ones repeatedly. There are 3 CUs within walking distance but I go to yet another one further away. I have 2 pharmacies within easy walking distance. The one that is a couple of blocks further away is a Shoppers and the closer one is smaller, yet I always go to the Shoppers even though I don't buy their junk food or cosmetics and my needs could be met at the closer smaller pharmacy. I don't even have an explanation. I mentioned the closer one to a neighbour who couldn't find a common OTC pharmaceutical product at Shoppers and she said she had never thought of going there even though she was aware of it and walks past it regularly. Humans are strange!

Anecdotally, of the several CUs that I either belong to or whose activities I pay some attention to, I see no consistent patterns of success. One of the small ones (one branch) is doing extremely well while others are not, as far as I can tell. Also, they seem to have one major criterion that is unique to CUs, which I don't understand very well Could try to look it up if that matters.

I would be interested in knowing about any papers you might encounter that seem particularly significant.

October 10, 2021
8:55 am
AltaRed
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Loonie said
I take your points, AltaRed.

What would be the thinking behind the idea that very big or very small is the most survivable? In the past, you seem to have suggested that very small was not going to last.

My original thinking of the small CU was not necessarily supported in the 'white paper' I read so I will have to find it (or them) again. It suggested small niche CUs particularly in the more remote communities could be more insulated from amalgamations. Think it was a BC regulatory paper.

Ultimately, the statistics will continue to speak for themselves.

October 10, 2021
2:37 pm
Loonie
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Your argument in the past has been that the small ones couldn't make it because of the cost of regulatory conformity etc which would overwhelm them and be inefficient. I have said that the small ones often give the best service. From what I see, some are not overwhelmed and the rest are not saying much. It seems to be more about simply being successful at growing a business (increasing members, more money). Maybe some were not well managed in the first place, and regulations make it more of a headache to deal with.

October 11, 2021
9:29 am
mmlt
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I am a member of FirstWest. I'm not sure how to take this "federal" move. They sure are pushing it. Received a large envelope recently full of mumbo jumbo.
The less the federal government is involved the better. I chose credit unions because they were small, community oriented, with superior customer service. Big banks never impressed me much.

October 16, 2021
9:46 am
AltaRed
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Not overly relevant to this thread, but I was bored a bit this morning and decided to compare the ex-Quebec CCUA 2Q 2020 Top 100 Credit Union report with the newly released CCUA 2Q 2021 Top 100 Credit Union report for differences. The highlights....

1. The number of CUs outside Quebec decreased from 236 to 226 most probably due to consolidations.
2. The top 100 now represent 94.7% of total assets versus 94.3% previously
3. For the first time in awhile, the top 5 (and the top 10) didn't grow assets proportionately faster than the 11-100 grouping.
4. Share of assets of those outside the top 100 continues to decline.

The most recent (Sept 2021) report is here https://ccua.com/app/uploads/private-files/top100-2Q21_15-Sep-21-1.pdf

October 16, 2021
11:30 am
Loonie
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Hmmm. Your point 3 seems to suggest the sector itself is growing, no? (I didn't read the report.) I wonder what that signifies with respect to the financial industry.

October 16, 2021
12:11 pm
Doug
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AltaRed said
Not overly relevant to this thread, but I was bored a bit this morning and decided to compare the ex-Quebec CCUA 2Q 2020 Top 100 Credit Union report with the newly released CCUA 2Q 2021 Top 100 Credit Union report for differences. The highlights....

1. The number of CUs outside Quebec decreased from 236 to 226 most probably due to consolidations.
2. The top 100 now represent 94.7% of total assets versus 94.3% previously
3. For the first time in awhile, the top 5 (and the top 10) didn't grow assets proportionately faster than the 11-100 grouping.
4. Share of assets of those outside the top 100 continues to decline.

The most recent (Sept 2021) report is here https://ccua.com/app/uploads/private-files/top100-2Q21_15-Sep-21-1.pdf  

Not sure it's related, but within the top 10 grouping of the CCUA report is Desjardins Ontario Credit Union, a non-CCUA member, so that could have an effect on the top 10's asset growth numbers articulated in points #3-4.

Cheers,
Doug

October 16, 2021
1:22 pm
AltaRed
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Affinity and Connect, collectively about $12B in assets, got knocked out of the top 10 with the addition of Desjardins and Prospera (both a result of amalgamations), collectively about $15B in assets. That doesn't affect point 3 but Desjardins could affect point 4.

Regardless, the number of CUs will continue to drop from 226 currently. Will be interested in following the stats simply from a FYI perspective. I love to follow trends and speculating on them.......

October 16, 2021
2:20 pm
Loonie
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Doug said

Not sure it's related, but within the top 10 grouping of the CCUA report is Desjardins Ontario Credit Union, a non-CCUA member, so that could have an effect on the top 10's asset growth numbers articulated in points #3-4.

Cheers,
Doug  

Yes, I think so. Apparently the merger of 11 (all?) Ontario caisses populaires into Desjardins CU Ontario only was finalized early 2020, so they are a new entrant, with 130,000 members, according to their website.
So I think it does affect point 3., or at least my question about it.
But I've never really understood Desjardins or the caisses populaires system. I think Desjardins is mostly known in Ontario for insurance, although a friend of mine in Toronto who has no French connections has their credit card.

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