February 4, 2003

Government needs to ensure a strong second tier of competition by enabling the expansion of the Canada's cooperative financial sector

OTTAWA, Feb. 4 /CNW/ - In its submission to the House of Commons Standing Committee on Finance, Credit Union Central of Canada said that mergers in the financial services sector are a "legitimate business strategy that can produce healthy outcomes for consumers and financial institutions." It added, "We do not distinguish between mergers involving large institutions or small institutions in this respect."

At the same time, the national credit union association encouraged the federal government to sustain "competitive balance" by strengthening the ability of co-operative financial institutions to compete against large commercial banks. Jack Smit, Chairperson of Credit Union Central of Canada, urged the government to "act quickly" to enact regulations drafted for the Cooperative Credit Associations Act, which would enhance the credit union system's ability to compete. These regulations were contemplated in Bill C-8, the federal legislation for the financial services sector that was passed in 2001. "Large banks are growing larger, even without mergers," Mr. Smit cautioned. "Our need for cost efficiencies and scale is a current, not a future need."

Mr. Smit further commented: "With the required legislative changes, the credit union system will achieve better operating efficiency and be able to support increasing technology costs. We will then continue to serve Canadians as the crucial second tier of financial institutions envisaged in government policy."

The presentation also highlighted a very important merger is underway involving Credit Union Central of British Columbia and Credit Union Central of Ontario. "These two Centrals are planning to establish a combined finance facility that will produce important efficiencies for credit union operations," Mr. Smit explained. He urged the federal government to: "Enact the legislation and regulations, where necessary, that will enable initiatives such as the CUCBC and CUCO merger to proceed and enhance our capacity to compete against the big banks."

With $65 billion in assets, 641 credit unions and 4.6 million members, Canada's credit union system is a vital competitor in the financial services industry. Credit Union Central of Canada ("Canadian Central") functions as the system's national trade association and central finance facility. The credit union system is a three-tier structure of local, provincial and national organizations. Local credit unions operate autonomously and are the primary shareholder members of provincial Centrals, which are in turn the primary shareholder members of Canadian Central. For more information about Canada's credit unions, check out www.cucentral.ca.