Getting bigger, but are credit unions getting better?

Business in Vancouver just published its 100 biggest private companies in BC issue. On the list are BC's five biggest credit unions. Also included in the supplement was a story on our flourishing credit unions. As you can see by the chart, assets under management have more than doubled in the past ten years.

However, what I find most interesting is the (almost invisible) light red line that shows the number of credit unions in British Columbia has been cut in half due to on-going mergers and acquisitions.

Here is an excerpt from the story:

According to the 2005 study by the Federal Reserve Bank of San Francisco, larger credit unions have lower average costs and greater returns on assets as their economies of scale increase. It noted that some of the largest credit unions have as much as double the returns on assets as a medium-sized credit union. Some of the smallest credit unions in the U.S. didn't even make a profit, according to the study.

"It relates to the cost of doing business, whether it be technology or other costs," said Rowland Kelly, Credit Union of BC's interim CEO. "Being a $3 billion organization, you can drive financial benefits from merging."

While consolidation will likely continue, both at the retail level with the individual credit unions and at the wholesale level with provincial credit union centrals merging, don't expect credit unions to become anything like banks.

"We're still, for the most part, relatively small financial institutions," Kelly said, "and we have a long way to go to become a Royal Bank or TD Bank, so I think that the risk of loss of that localness is not on the horizon."

I am saddened by this article. I have a major sweet spot for small credit unions. I love the social impact and the whole fabric of the community thing. Is economy-of-scale the end-all-be-all or is there something else that we are missing?

So I ask you: is the small credit union a thing of the past? Should we not be worried about a loss of localness? Is bigger always better? Is a 10-credit union system inevitable? Is anyone else out there worried about the credit union movement's soul?

Tim