The Credit Crunch- Are credit unions able to ride out the storm ?

Journal of Banking Regulation

Volumn 11, Issue 1, 2009, Pages 76-86

  Ryder, Nicholas ^a   Chambers, Clare ^a  

^a UNIVERSITY OF THE WEST OF ENGLAND   (United Kingdom)

Author keywords

Credit crunch; Credit unions; Republic of Ireland and deposit protection schemes; United Kingdom; United States of America

Indexed keywords

EID: 73949086156     PISSN: 17456452     EISSN: 17502071     Source Type: Journal    
DOI: 10.1057/jbr.2009.14     Document Type: Article

References (88)

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21. The nationalisation of Northern Rock was implemented by the Banking (Special Provisions) Act 2008. For a more detailed commentary of the problems faced by Northern Rock see Gray, J. (2008) Lessons from BCCI saga for the current accountability debate surrounding Northern Rock? Journal of International Banking Law and Regulation 23(2): 37-43 at pp. 41-43.
22. BBC News. (2009) Bank ire fuels credit union surge. 20 March, http://news.bbc.co.uk/1/hi/scotland/glasgow-and-west/7954761.stm, accessed 12 September 2009.
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24. For a more detailed discussion of the UK government's policy towards credit unions see Ryder, N. (2009) The credit crunch - The right time for credit unions to strike? Legal Studies 29(1): 75-98.
25. A full list of these credit unions can be accessed via the homepage of the Financial Services Compensation Scheme at http://www.fscs.org.uk/.
26. For a commentary on the benefits of merger and rationalisation of credit unions see Ryder, N. (2005) The regulation of credit unions: A comparative analysis between the USA and Great Britain. Journal of Banking Regulation 6(3): 261-273.
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34. For a more detailed discussion of these changes see Financial Services Authority. (2008) Financial Services Compensation Scheme: Review of Limits. London: Financial Services Authority,
35. and HM Treasury (2008) Financial Stability and Depositor Protection: Special Resolution Regime. London: HM Treasury.
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37. For an early analysis of the impact of the Credit Unions Act 1979 on the growth of credit unions in the United Kingdom see Lewis, B. (1982) Credit unions: Past, present and future. European Journal of Marketing 16(3): 54-62.
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43. See, for example, Sibbald, A. Ferguson, C. and McKillop, D. (2002) An examination of key factors of influence in the development process of credit union industries. Annals of Public and Co-operative Economics 73(2): 399-428 at p. 401.
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45. Public Law 91-206 (10 March 1970, 84 Stat. 49).
46. Burns, J. (1979) Origin of the Term Common Bond in Credit Union Usage: A Progress Report. Madison, WI: Credit Union National Association.
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53. The National Credit Union Share Insurance Fund is a 'share protection scheme' that safeguards the savings of members if the credit union becomes insolvent.
54. Interpretative Ruling and Policy Statement 82-3, 47 Red. Reg. 26808 (22 June 1982).
55. In 1982, the NCUA reinterpreted the common bond requirement as allowing occupationally and associational-based credit unions to add select employee groups provided each credit union had its own common bond. This policy arose in response to a large number of credit union failures at that time, which stemmed from associated business failures. The recession of the early 1980s caused thousands of firms to close or relocate. Credit unions associated with such firms had limited membership and subsequently experienced severe solvency related problems. There were 500 federal credit union failures or liquidations in 1981 alone.
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58. Financial Services Authority. (2007) Credit Union Statistics 2006. London: Financial Services Authority at p. 2.
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60. For example, in Northern Ireland, 26 per cent of the population belong to a credit union, while credit unions in Central West Scotland account for 35 per cent of the total UK membership. Ward, A. and McKillop, D. (2005) An investigation into the link between UK credit union characteristics, location and their success. Annals of Public and Cooperative Economics 76(3): 461-489 at p. 462.
61. Sibbald, A., Ferguson, C. and McKillop, D. (2002) An examination of key factors of influence in the development process of credit union industries. Annals of Public and Co-operative Economics 73(2): 399-428, n. 50 at pp. 402-404.
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64. Ryder, N. and Chambers, C. (2008) The funding of credit unions - Where has all the money gone? Journal of Social Welfare Family 30(3): 243-252.
65. Ryder, N. (2002) The Financial Services Authority and credit unions: The final piece of the jigsaw? Nottingham Law Journal 11(2): 17-32.
66. Ryder, N. (2002) The Financial Services Authority and credit unions: The final piece of the jigsaw? Nottingham Law Journal 11(2): 17-32 at p. 22.
67. For a more detailed account of the relationship between the FSA and credit unions see Baker, A. (2008) Credit union regulation and the financial services authority: Less is more but better. International Journal of Law and Management 50(6): 301-315.
68. Financial Services and Markets Act 2000, ss. 212-224. The Compensation Scheme is a safety net for customers of authorised financial services firms and it can pay compensation if an authorised firm is unable, or likely to be unable, to pay claims against it. In general this is when a firm is insolvent or has gone out of business. The Compensation Scheme replaced eight existing schemes including the Deposit Protection Scheme, the Investors Compensation Scheme and the Policy Protection Scheme.
69. A credit union shall not be registered unless the registrar is satisfied that it has a policy of insurance complying with the requirements of this section. Credit Unions Act 1979, s. 15(1). The Act also provides that the insurance policy must cover 'every description of loss suffered or liability incurred by reason of the fraud or other dishonesty of any of its officers or employees'. Credit Unions Act 1979, s. 15(2).
70. See Financial Services Authority. (2006) Financial Services Authority Compensation Sourcebook. London: Financial Services Authority.
71. See Financial Services Authority. (2007) Compensation scheme to cover 100% of depositors' claims up to £35,000. Financial Services Authority Press Release, 1 October 2007, http://www.fsa.gov.uk/pages/Library/ Communication/PR/2007/105.shtml, accessed 3 June 2009.
72. Also see Financial Services Authority. (2007) Financial Services Authority Compensation Sourcebook. London: Financial Services Authority at COMP 10.2.3.R
73. and Financial Services Authority. (2007) Compensation Sourcebook (Protected Deposits Limit) Instrument 2007. London: Financial Services Authority. It is important to note that this increase in the level of compensation was not influenced by near collapse of Northern Rock.
74. For a more detailed discussion see BBC News. (2003) Compensation for credit union members, 16 April, http://news.bbc.co.uk/1/hi/england/tyne/2953297. stm, accessed 1 June 2003.
75. Financial Services Compensation Scheme. (2003) Financial Services Compensation Scheme will protect credit union members. Press Release, 16 April 2003, http://www.fscs.org.uk/files/documents/pdfs/cqsyrlxuwwgpwyu.pdf, accessed 25 June 2003.
76. Irish League of Credit Unions. (2002) Growth of the Credit Union Movement in Ireland. Dublin, Ireland: Irish League of Credit Unions.
77. World Council of Credit Unions. (2005) Model Law for Credit Unions. Madison, WI: World Council of Credit Unions, n. 7 at p. 1.
78. McCarthy, O., Briscoe, R. and Ward, M. (2000) Redesigning the credit union for the new millennium: A case study of Ireland. The World of Co-operative Enterprise: 117-130 at p. 117.
79. Ferguson, C. and McKillop, D. (1997) The Strategic Development of Credit Unions. Chichester, UK: Wiley, n. 54.
80. Sibbald, A., Ferguson, C. and McKillop, D. (2002) An examination of key factors of influence in the development process of credit union industries. Annals of Public and Cooperative Economics 73(2): 399-428, n. 50 at p. 418.
81. Membership of the SPS scheme is also available to credit unions in Northern Ireland. It must be noted, however, that credit unions in Northern Ireland are not protected by the Financial Services Compensation Scheme and its members.
82. Registry of Friendly Societies. (2001) Report of the Registry of Friendly Societies 2001. Dublin, Ireland: Stationary Office at p. 10.
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