Financial market turbulence and you

Like most Canadians, credit union members are worried about the current turmoil in the financial markets. Many want to know if their credit union remains sound and reliable, and whether their deposits are safe. The answer to both questions is: yes

. Here's why you can continue to count on your credit union:

• The credit union system is thriving and continues to grow. Assets of the B.C. system stood at more than $42 billion at year-end 2007, up almost 60 percent in just the past five years.
• Credit unions in Canada have high deposit levels sourced mainly from local credit union members rather than global capital markets. This provides a stable deposit base relative to other financial institutions in Canada, the U.S. and elsewhere. In B.C. alone, credit unions have $37 billion on deposit, representing growth of almost 50 percent over the past five years.
• Credit unions and other Canadian financial institutions do not offer sub-prime mortgages - a chief cause of the current turmoil in the U.S.
• Credit unions loan prudently in communities where we live, work and serve. As a result, our loan delinquency rates are exceptionally low by historical standards.
• Credit unions have more than 150 percent of the capital reserves required by regulators. Eighty percent of these are retained earnings, which are funds accumulated from years of profitable operation. In fact, the Enderby & District Credit Union has more than 300 percent of the capital reserves required by the regulators - made up of over 92 percent by retained earnings.
• Credit unions maintain required liquidity levels, ensuring funds are available to meet obligations to depositors at any time, including during periods of financial market upheaval.
• The provincial government of B.C., through the regulator, the Financial Institutions Commission of B.C., provides strong oversight of credit unions.
• The Credit Union Deposit Insurance Corporation of British Columbia (CUDIC), a provincial corporation administered by the Financial Institutions Commission, an agency of the B.C. government, provides deposit insurance for deposits at credit unions.
• As announced by the Office of the Premier October 22, 2008, the Province intends to provide unlimited deposit insurance protection on deposits to British Columbia's credit unions effectively immediately.
• The complete news release from the office of the Premier can be viewed at: www2.news.gov.bc.ca/news_releases_2005-2009/2008OTP0260-001612.htm#
• Current details on deposit insurance are available at the Financial Institutions Commission website at www.fic.gov.bc.ca/responsibilities/cudic/overview.htm

Q&A

Deposit Insurance

1. Are my deposits insured?

• Your money is safe and secure with your credit union. No member of a B.C. credit union has lost a cent of his or her deposits, since the Credit Union Deposit Insurance Corporation of British Columbia (CUDIC) was formed in 1958. Member deposits are backed by CUDIC, a provincial corporation administered by the Financial Institutions Commission, an agency of the B.C. Government.
• As announced by the Office of the Premier October 22, 2008, the Province intends to provide unlimited deposit insurance protection on deposits to British Columbia's credit unions effective immediately.

• Yes, we are secure and financially stable. We are closely regulated and follow conservative investing and lending practices and our balance sheet reflects our strong local focus.

• Yes. The credit union system has a long history of prudent financial management and conservative practices. It is closely regulated by the provincial government. Both the provincial government and the federal government regulate our central credit union. Credit unions follow a disciplined approach to fiscal management during upswings and downswings in the economy. Ensuring the safety of members' deposits is always a top priority. Our focus is on our communities and helping our members. Credit unions have not been involved in the sub-prime lending that has caused problems in the U.S.

• The deposit insurer is a provincial government entity.

• Canada has one of the most, if not the most, financially stable banking systems in the world. The Canada Deposit Insurance Corporation (CDIC) has said that the Canadian financial system is in good shape and that Canada's banks are well capitalized.
• Credit unions have a solid deposit base, a sound portfolio of loans in their local communities and prudent capitalization levels. Credit unions are regulated financial institutions with excellent liquidity support at the local, provincial and national levels that are designed to withstand financial market turbulence.

• Yes, credit unions are primarily funded by member deposits, not borrowings, as many U.S. banks arev
  
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• Chief Economist Helmut Pastrick of Central 1 Credit Union says that the crisis we are facing is a financial crisis, not an economic one. The problem is largely confined to the financial and credit markets and the impact on jobs and the economy is expected to be less. We may face an economic slowdown, but not a dramatic downturn.