MADISON, Wis. (5/20/10)--The Filene Research Institution’s most recent publication, “Withstanding a Financial Firestorm: Credit Unions vs. Banks,” examines how the recession affects credit unions and banks. The report found a quantifiable correlation between unemployment and bank lending--with each percentage point rise in unemployment, bank lending growth dropped 1.15%. At credit unions, there was no statistically verifiable decrease, Filene said.
Withstanding a Financial Firestorm: Credit Unions vs. Banks
Other points the paper noted:
* The magnitude of delinquencies and charge-offs at banks is more pronounced than at credit unions; * Because credit unions are about 75% as sensitive to macroeconomic shocks as banks are, regulators should consider imposing lower capital requirements to account for the lower risk; and * More open charters do not seem to have made credit unions more risky. Despite gradual moves away from closed charters after the passage of the National Credit Union Membership Access Act, credit unions have retained conservative portfolio strategies.
The publication was written by David M. Smith, Ph.D, and associate professor of economics at Pepperdine University, and Stephen A. Woodbury, Ph.D., professor of economics at Michigan State University.