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A National Credit Union and ducks

April 8, 2010

You will be hearing lots about recent federal Canadian draft legislation that allows credit unions to move beyond their historical provincial domains into a national marketplace. It will be an interesting debate.

To start off there will be a lot of new rules the new federal ‘credit union’ will have to operate under. But wait a second. Lets establish who and what this new entity will be. Will it be a ‘credit union’? I don’t think so. It will be a co-operative bank. Someone once said if it walks like a duck and talks like a duck it is a duck. And you don’t even have to look at the new set of rules that the co-operative bank will have to live under. Just look at what has happened in other co-operatives. Agricultural co-operatives (grain and dairy) have evolved from being co-operatives to corporations because their size dictated it. They needed more capital to grow. They just couldn’t find the capital from the membership or from the equity they had built up. They had to go beyond these two sources and that forced them to evolve into a corporation that could access capital markets. That happened with them and that is about to happen to credit unions as their size expands. They have a corporate model for growth that will eventually reach a point when there needs to be a choice to continue in some fashion as a credit union or to move to become a co-operative bank. I support this legislation as it follows historically what has happened in the co-operative system. Just make sure your members vote for it and realize if it walks like a co-operative bank and talks like a co-operative bank then it is a co-operative bank and not a credit union.

PS. This is one paragraph of what appeared in an Edmonton newspaper in response to the question about a credit unions going national.

In his 2010 federal budget, Finance Minister Jim Flaherty said Ottawa will draft legislation that allows credit unions to incorporate federally. Credit unions welcomed the move, saying operating outside their traditional provincial boundaries will give them more options to expand.

When a newspaper quotes “Credit unions welcomed” the move they must make sure they list the credit unions that have this opinion. It needs to say that this opinion is not held by most as a reason for welcoming the draft legislation.


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