Canadian CUs see banks' M&A as opportunity

TORONTO (7/15/05)--Credit unions have turned into an unlikely ally for Canadian banks seeking expanded merger and acquisition (M&A) authority (Financial Times July 13).

Banks have been trying to get expanded M&A authority for more than seven years. However, opponents claim that any combination of Canada's "Big Five" banks--Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, and Bank of Montreal--would create a mega monster. A combined bank from this group would crush smaller rivals while closing branches and laying off thousands of workers, say opponents.

Enter Canada's credit unions, which see bank mergers as an opportunity. "We're not lobbying for bank mergers," said Joanne De Laurentiis, president of Credit Union Centroal of Canada. "We want to buy branches. They would help us bulk up and grow more quickly," she said.

According to Finance Minister Ralph Goodale, "The credit union movement has been the single most vigorous lobby on this topic for the last six or eight months." During an interview with The Globe and Mail, Goodale said, "This was not a factor in previous rounds of discussion...[but] boy, this time they are aggressive."

The Financial Times article indicated that credit unions are no match for the big banks in business terms. Combined credit union assets are C$78.5 billion (US$65 billion), roughly one-fourth of the assets of the smallest of the Big Five banks.

But credit unions "have deep roots in local communities, giving them considerable political clout" in certain areas, acknowledged the Times. And, they "don't pack up and go to Hong Kong," said credit union regulator Andrew Poprawa, chief executive, Deposit Insurance Corp. of Ontario.

The credit unions' campaign comes as the government is looking for ways to encourage a range of second-tier level financial institutions.