Thank you, Mr. Chair and committee members, for inviting us to be part of this very important study into the current opportunities and challenges facing the cooperative sector in Canada.
My name is Stephen Fitzpatrick. I'm the vice-president of corporate services and chief financial officer at Credit Union Central of Canada. As such, I'll be speaking from the perspective of credit unions, full-service financial institutions that are cooperatively owned by their individual and commercial members.
I will touch on a couple of the topics my colleague discussed, but as you may expect, we may have a slightly different perspective on some of those matters.
I was to have been accompanied by Monsieur Denis Laframboise, who's the president and CEO of Ottawa-based Your Credit Union. However, he had to deal with a personal matter this morning. He may be here a little later, but we will carry on.
I'd like to start by just providing you some contextual information about credit unions. The Canadian credit union system is a vital competitor in the financial services industry. Credit Union Central of Canada, known as Canadian Central, is the national trade association for its member organizations, which are the centrals, and through them 363 Canadian credit unions.
Canada's credit unions operate a branch network with more than 1,700 locations. These branches serve more than five million members and employ almost 26,000 people across Canada. Almost one-quarter of credit union locations serve small communities where the credit union is the only financial services provider.
As member-owned financial cooperatives, service continues to be our number one motivation. That commitment to service is gaining recognition. For the seventh consecutive year, Canadians ranked credit unions first in overall customer service excellence among all financial institutions, surpassing all the Canadian banks in Synovate Canada's 2011 best banking awards. Credit unions also took sole honours in the categories of “values my business” and “branch service excellence”. In addition, credit unions tied for first place among Canadian FIs in the categories of “financial planning and advice” and “telephone banking excellence”.
I'd now like to highlight for you some of the current trends in the Canadian credit union system. First of all, credit unions continue to be strong performers. Even through the economic crisis, Canada's credit union system has performed extremely well. Canadian credit unions ended 2011 with assets that were 10.1% higher than in 2010, reaching $140.2 billion, while generating record profitability. For comparison, this asset size, $140 billion, is roughly comparable to that of the National Bank of Canada.
Our cooperative model is a key reason for our solid financial performance. Direct accountability to our members, each of whom has an equal say in our operations, means that credit unions are prudent lenders and naturally inclined towards productive investment in our local communities. This strong financial performance has resulted in continued growth in membership. Today more than 5.2 million Canadians belong to a credit union. Our membership growth has slightly outpaced population growth. Despite competition from the large banks and other financial services providers, credit union membership has grown at an average annual rate of 1.2% over the last 10 years. During that same period, Canada's population grew at an annual rate of 1%.
Consolidation in the credit union system is a continuing trend. For decades, some credit unions have responded to increased complexity, to compliance costs, and to changing demographics through consolidation. Mergers between neighbouring like-minded credit unions offer effective solutions to meet the competitive challenges of our rapidly changing financial services industry, while at the same time permitting growth and diversification opportunities in a larger market.
Many small and medium-sized credit unions, and lately larger credit unions, continue to join forces to reduce overhead costs, afford new technology, and offer a broader range of better products. As a result, between 1992 and 2011 the number of credit unions has decreased by 726, declining at an average rate of about 36 credit unions per year.
While mergers have reduced the total number of credit unions, the network of branches, combined with the range of electronic banking services available to members, remains strong. As an example, over the last 20 years the number of ATMs in the system has increased by approximately 50%.
Overall, credit union mergers have contributed to our vibrancy, and they've strengthened our commitment to local and community banking. The result is a combination of locally owned small, medium, and large credit unions that reflect the individuality and character of the communities they serve.
I'd like to talk about the federal credit union option just briefly. The consolidation and growth of the system has implications for the traditional geographical scope of credit unions. For instance, in British Columbia, the three largest credit unions hold 61.5% of the assets in that province. Similarly, in Alberta, the largest credit union holds 59.6%, and in Newfoundland and Labrador, the largest holds 52%. For these credit unions the greatest potential for growth and expansion is beyond the borders of their province of incorporation. For this reason, among others, Canadian Central welcomed the federal credit union legislation that was adopted as part of Budget 2010. We were pleased to hear last week that draft regulations have been released for comment, and we look forward to the coming into force of this legislation that will enable credit unions to choose a new option to address growth opportunities and enhance service to their members.
As we manage growth and the growing expectations of our members in the communities we serve, credit unions do face marketplace and regulatory challenges where the federal government has a role. There are two in particular I would like to draw to the committee's attention today.
First is in relation to small business. Credit unions appreciate the role we play within a strong regulatory framework to protect the savings and security of Canadians. However, we share the concerns of many members of Parliament that regulations are being applied in the same manner for financial institutions with 2,000 employees as they are for those with a dozen or fewer, the result being relatively high compliance costs for credit unions. In their recent final report, the government's red tape reduction commission emphasized that a “one size fits all” approach to regulation tends to disproportionately burden smaller businesses like credit unions.
We urge the federal government to follow through on its commitment in Budget 2011 to require regulators to examine current and future regulation through a small business lens to ensure that new and existing rules do not adversely affect credit unions while creating unintended advantages for larger financial institutions.
Another issue of concern to credit unions is the legislative mandate of Farm Credit Canada. Credit unions value the role of Farm Credit Canada, the role it plays as a committed partner that supports Canadian agriculture in good times and bad. However, the FCC is in an anomalous position relative to other crown financial institutions. It does not face a requirement to lend in the manner that complements the activities of private sector FIs, but instead it can aggressively compete head to head with credit unions while enjoying marked advantages that are related to its status as a crown corporation.
It is also unique in that unlike Export Development Canada and the Business Development Bank of Canada, FCC is not subject to a regular parliamentary mandate review. Canadian Central recommends that the government undertake a public review of the Farm Credit Canada Act to ensure that FCC continues to play a relevant role in a competitive marketplace. We also recommend that the government consider amending FCCs legislation and operating principles to bring them into closer alignment with those of the Business Development Bank and Export Development Canada. Specifically, this would mean that the legislation governing FCC would be subject to a regular parliamentary review, and second, that this legislation would be amended to require FCC to operate in a manner that complements rather than competes with the activities of private sector lenders.
Mr. Chair, Canadian Central wishes to thank this committee and your colleagues for undertaking this important and timely study. Across Canada this year, credit unions are taking part in celebrations to mark the 2012 International Year of Cooperatives. This is an ideal time to reflect upon the vital role that cooperatives have played in building our country and upon how together we can continue to promote and grow cooperatives and credit unions as democratic, responsive, and successful businesses.
I thank you very much for the opportunity to provide some thoughts to you today. We're here to take any questions.