Should I pull my money out of these Credit Unions? - Page 2
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Thread: Should I pull my money out of these Credit Unions?

  1. #11
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  2. #12
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    Can someone familiar with credit unions tell me... does Credit Union Central (either the Canada wide one or Credit Union Central of Manitoba) provide additional back-stop facilities? For example, can credit unions in need of liquidity borrow from Central?

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    Senior Member NorthernRaven's Avatar
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    Quote Originally Posted by james4beach View Post
    Can someone familiar with credit unions tell me... does Credit Union Central (either the Canada wide one or Credit Union Central of Manitoba) provide additional back-stop facilities? For example, can credit unions in need of liquidity borrow from Central?
    Yes, that's one of their purposes. I think you could consider them to carry out some of the non-sovereign Bank of Canada functions for CUs.

    For Manitoba's CUCM:
    CUCM manages liquidity reserves, monitors credit granting procedures and provides trade services in areas such as corporate governance, government relations, representation and advocacy.
    Obviously they have limited resources compared to the BoC printing presses, but they'd be involved.
    Last edited by NorthernRaven; 2017-05-02 at 12:40 PM.

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  5. #14
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    That's interesting then, because Credit Union Central (according to their financial statements) also has some positions with chartered banks, by which I presume they mean Big Five.

    I wouldn't rule out the possibility that Credit Union Central can get loans from Big Five banks. They already have some interest rate swap guarantees from chartered banks.

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    Thanks everybody! Very informative. I feel a bit better educated. Just out of curiosity....does anyone have an opinion on Canadian Tire Bank or Peoples Trust? I have GICs there too. ( I bank with so many companies to spread the risk, I hope anyway, and to keep under 100K in any one account).

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    I'm not a fan of Peoples Trust, they're also a mortgage-specialized lender.

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    Quote Originally Posted by james4beach View Post
    Can someone familiar with credit unions tell me... does Credit Union Central (either the Canada wide one or Credit Union Central of Manitoba) provide additional back-stop facilities? For example, can credit unions in need of liquidity borrow from Central?
    Not that I'm aware of. That's the domain of the deposit guarantee organizations which have supreme authority over CUs in crisis.

  9. #18
    Senior Member NorthernRaven's Avatar
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    Quote Originally Posted by TomB16 View Post
    Not that I'm aware of. That's the domain of the deposit guarantee organizations which have supreme authority over CUs in crisis.
    The central would provide day-to-day liquidity smoothness (and backroom services, etc), and I suspect would be the conduit for exceptional but non-crisis liquidity help from wherever. Individual Manitoba CUs keep reserves at CUCM and have that ongoing relationship with them. Actual money flowing from the guarantee corp (either directly or indirectly) is probably a bad sign... :

  10. #19
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    Right, central provides liquidity, which really is most of story. Think of the 2008 banking crisis. All of the big five banks (and especially Scotia, CIBC, BMO) made very heavy use of liquidity facilities from central banks -- short term loans. This liquidity is probably what kept the banks alive.

    Access to liquidity is very important during market distress and it's good to know that the credit unions have access to that, just like the big banks do.

    By the way, from what I know, the credit unions did not have trouble through the 2007-2008 storm. Unlike big banks, the credit unions don't have enormous derivative positions. They don't have huge capital market exposure, exposure to distressed debt, exotic credit instruments, etc. Credit unions also are better capitalized and operate with less leverage than the big banks. They are fundamentally safer operations.

  11. #20
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    In regards to liquidity, in BC and presumably other jurisdictions, individual credit unions are required to maintain 10% liquidity by way of deposits in the Central cr union. However, most have even higher liquidity targets (ours was 12-15%) and if it got close to the 12% we were more aggressive in our deposit rates. We also had access to credit facilities through the central credit union. Other sources of liquidity could come from individual credit lines with banks or bundling up and selling mortgages to other credit unions who had surplus liquidity. If I recall correctly, the central cu also had access to credit lines. Never was an issue but again, it was managed closely. Mind you, I retired 15+ years ago but I doubt if there has been any material change.
    In regards to derivative exposure the only ones we had was interest rate swaps but these were only to manage interest rate risk. I believe other CU's mainly used these as well.


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