Credit Unions Vs. Banks – Credit unions are owned by their customers or, in industry parlance, “members”, big banks are owned by their shareholders.
A key narrative of the recent Bank Transfer Day was to pit normally sleepy credit unions against the big banking industry. Skeptics are quick to point out the fact that credit unions hardly went unscathed during the 2008 financial crisis, yet CU advocates argue that their institutions fared better than commercial banks.
In 2008, the rate of commercial bank failures was almost triple that of credit unions (0.60% to 0.23%), and that increased to almost five times the credit union rate in 2010 (1.86% to 0.40%). While the sluggish economy seems to have also negatively affected credit unions, they experienced nowhere near the surge of failures seen in the commercial banking sector.
A similar pattern is evident in the case of institutions considered to be problematic by NCUA or FDIC. Though slightly muddied by the fact that the FDIC does not differentiate between commercial banks and savings banks in their statistics, the picture is still pretty clear: While negatively affected by the crisis, credit unions did not experience the sort of radical departure from their baseline rate that banks did.
Many credit unions exist to further community development or sustainable international development on a local level, and could be considered community development financial institutions.