Question: What are the key elements that make credit unions safe and secure? How do credit unions compare to other financial service providers in these regards?
Answer: When it comes to safety and soundness, banks and credit unions differ in two major areas: Size and Capital. But, what, actually does that mean?
- Size … Credit unions are much smaller than banks overall. In 2008*, the average sized credit union in the US had $103.7 million; the average size of a commercial bank was $1.74 billion. Overall, credit unions had approximately $825 billion in assets compared to the banks’ almost $12,318 billion in assets that year. In Montana our credit unions are, on average, much smaller — only 9 of our 57 credit unions had emor than $100 million in assets at year end 2009. Click here for those statistics.
- Capital … Credit unions have a stronger capital base than do banks; and the credit union capital-to-asset ratio is increasing. As of year-end 2008, the average capital to assets of federally insured credit unions was 10.9% as compared to 9.45% for banks. Capital in your credit union is at less risk because credit unions only make loans to members. Credit unions don’t make loans to foreign countries, or loans for highly-leveraged corporate buyouts.
*Year end 2008 was the most recent date that we could find comparable data for credit unions and banks. We'll update these as soon as possible.