Aiming Higher : How to Build Greater Resiliency for Large Credit Unions in Canada

Credit unions represent an important part of the Canadian banking sector and, therefore, the Canadian economy. Outside of Quebec, at the end of 2021 credit unions held almost $280 billion in assets, representing about 7 percent of banking sector assets.While improving corporate governance has been part of the reform agenda for federal policymakers and banks since the financial crisis, less is known about how credit unions have evolved their governance practices and standards to address the growing complexity of banking.This E-Brief begins with a snapshot of the evolution and performance of the credit union sector over the 2012-2019 period, reviews the practices and board composition at some of the country’s biggest credit unions and makes recommendations for improvement.Among them: Clarity of purpose is critical as credit union boards determine what is behind the gap between their performance and that of the banks in terms of two key measures, namely return on assets and the efficiency ratio.Credit unions need to ensure that board and member dynamics are conducive to good communications, thereby increasing transparency and information flow to members and encouraging meaningful member engagement.Boards can guard against “capture” by providing management with a set of performance indicators and attendant incentives that create an efficiently run credit union to deliver meaningful benefits for members