For more than a century now, Canada’s credit unions have been geared toward local markets, but that could soon change.
In a few months members of First Calgary Savings will be able to access their accounts from any Envision Financial branch in British Columbia, essentially circumventing the rules against mergers and setting up shop in another province.
Dave Gregory, president and CEO of First Calgary, says diversifying risk and allowing its members to live in another province without changing financial institutions are the main motivators behind partnering with Envision. “We have a very mobile community,” he says. “We want to be able to reach out to them when they’re going across borders without having an additional relationship.”
With this arrangement, Envision staff would have access to First Calgary’s computer database and vice versa. That means people from Alberta could walk into a B.C. Envision branch and conduct business like they normally would. Although they’re using Envision’s services, they’d still be a First Calgary member.
Gregory says the focus won’t deviate from the company’s local philosophy, but having a regional network will cut down costs. “This is meant to affect our balance sheets,” he says. “Our local identification will remain.”
But don’t be surprised if this move one day leads to a cross-border merger. Right now the credit union industry is provincially regulated, so institutions that operate in different jurisdictions cannot buy each other.
However, there is a move afoot that could one day lead to a national credit union, which would break down provincial barriers. Art Chamberlain, a spokesperson for Credit Union Central of Canada, says a proposal for a national credit union went to the federal government, but so far there hasn’t been any response.
He wouldn’t be surprised, though, if credit unions were allowed to merge in the future. “I don’t see why it wouldn’t happen,” he says. “But the reality is a ways down the road.”
Gregory admits that while it’s not necessary to merge with Envision, it could be a more efficient way of operating, and if the rules change, it might be something he’d look at. At the moment, though, Gregory is more concerned about “merging balance sheets and efficiency.”
To Chamberlain, merging or forging a credit union partnership makes sense. He says with people becoming more mobile, these institutions don’t want to lose members.
But if credit unions grow, will they still be able to keep tabs on their local members’ needs? “It’s always a challenge as they get larger to maintain a connection with a community,” says Chamberlain.
He points out that credit unions have merged within provinces, so they’ve already had to address these problems. Some credit unions have created member groups at the branch level that meet and discuss issues members might have.
Affinity Credit Union in Saskatchewan has regional meetings where branch members in an area will get together and discuss a variety of things from local issues like community grants to larger credit union problems. “We’d see the same things if the credit unions were to operate across provincial boundaries,” says Chamberlain. “They’ll take steps to keep members involved.”
Until a national credit union is formed, mergers won’t happen, but for financial institutions that want to team up, they’ll have to deal with provincial regulators. For Envision and First Calgary, Gregory says the regulators were supportive and helped the companies with logistical issues. Still, working with a credit union in another province hasn’t been easy. “Has it been a smooth ride?” asks Gregory. “No. Provincial regulators are only provincial, so that’s an issue, but they’ve been very supporting and understand that from a balance sheet point of view we will get stronger.”
Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com
(08/26/08)