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Credit where it’s due: the evolution of Saskatchewan’s credit unions

Credit unions and the policies that govern them need to adapt to help ensure viability

REGINA, SKMay 27, 2014 – Credit unions—long a vital player in Saskatchewan’s financial system— are facing new and unique business challenges. New research from The Conference Board of Canada shows that credit unions have to continue to evolve to remain successful and relevant in Saskatchewan. The research also suggests that policy makers should accommodate the unique structures of credit unions in taxation and financial regulatory policy.

The Conference Board of Canada report from the Saskatchewan Institute, entitled Positioning Saskatchewan’s Credit Unions for Growth, will outline the challenges facing credit unions and potential solutions at the Saskatchewan Forumon Wednesday, May 28, at 10 a.m. at the Delta Regina.

“If credit unions and policymakers work together, credit unions can continue to be successful going forward,” saidMichael Grant, Director of Research, Industry and Business Strategy.


  • Credit unions play a greater role in Saskatchewan than they do elsewhere in Canada.
  • The credit unions’ business model makes it harder for them to compete within a booming economy.
  • Federal and provincial policy changes could improve the ability of credit unions to compete in a growing market such as Saskatchewan.

Credit unions are small-scale financial institutions that are owned by members, and serve customers primarily through physical branches. Their role in Saskatchewan’s financial market is unique. For example, Saskatchewan’s credit unions have a 30 per cent market share in commercial loans, compared to eight per cent nationally. Member ownership also allows credit unions to get to know their customers well, which reduces risk.

Credit unions’ cost of doing business is of concern, however. Credit unions operate more physical branches inSaskatchewan’s rural communities than do the major banks. While highly valued by members, branches are also a more costly means of delivering retail financial services.

In addition, Saskatchewan is a booming economy with billions of dollars in investments on the books. In such growing economies, individual credit unions are often faced with a situation where the growth in loan demand exceeds the growth of member deposits—upon which credit unions rely heavily for capital. As a result, individual credit unions are less able to contribute to and participate in Saskatchewan’s growth.

Credit unions are responding to these challenges either by becoming larger on their own account or through strategic partnerships to lower costs and invest in the latest technology.

Recent policy changes at the federal level have raised concerns about the effects on Saskatchewan’s credit unions.  For example, new capital adequacy regulations that affect credit unions have been designed for large banks, which, because of their size, can more easily comply without undermining their competitiveness. Policies such as anti-money laundering regulations also increase costs for credit unions, which are less able to shoulder the added expense.

In addition to the costs of increased regulatory requirements, the federal government has announced changes in tax policy that are intended to treat credit unions the same as large deposit-taking financial institutions. The 2013 federal changes would eliminate credit unions from having access to the federal lower small business tax rate. While the policy change is intended to treat credit unions and banks equally, it is effectively leading to different tax treatment because the business models are so diverse.

The tax changes are estimated to cost Saskatchewan’s credit unions between $3 million and $4 million per year. The increased tax bill could have been even higher, but the Province of Saskatchewan chose not to follow the federal lead in regard to credit unions.

The report recommends that policymakers work with credit unions to “right size” capital adequacy regulation, recognize the costs of regulatory policy on credit unions, and reassess the role of federal Crown Corporations that compete directly with credit unions for business.

This is the second Saskatchewan Institute report that considers aspects of Saskatchewan’s financial capacity and needs, in the new era of Saskatchewan as a “have” province.

SOURCE Conference Board of Canada

 For further information:

Brent Dowdall, Media Relations, Tel.: 613- 526-3090 ext. 448


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