In December 2009, my friend Arianna Huffington called with this idea to educate "ordinary" people about the financial system. At the time, I directed Institutional Risk Analytics to prepare and launch a pro bono zip code tool to search for best of breed small and mid-sized banks. We called that project "Move Your Money". The tool has been running ever since and, as of today, has been used over 1.3 million times and counting.
For people needing detailed information about banks, the "Move Your Money" tool is backed up by a commercial system that extracts professional analytics from IRA's Professional Bank Monitor risk analysis engine and packages into an online shopping cart for consumers. The cart system itself owes its origin to a challenge from the good folks at CBS Evening News back in 2008 to explain the arcane world of banking in terms consumers could do something with at a reasonable price compared to what one charges a Wall Street investment house for such math grinding information. Distilling thousands of reporting numbers into simple letter grades was the result.
From the outset of "Move Your Money", consumer demand to see performance and risk information on credit unions came roaring through the grapevine. People love credit unions which they see as a socially responsible alternative to being a bank customer. What's not to like about a place that calls your deposit dollar a "share" in the collective.
But it takes time to study these institutions behavior patterns and the patterns of their regulating authority, the National Credit Union Administration (NCUA). The rules are different and the metrics are not directly comparable to the norms and expectations imposed on banks by the Banking Act gaggle of regulators at the FDIC, FFIEC, OCC, OTS and Fed. For long-term solutions to a long term crisis, I decided it was better to take the time to study things in a considered fashion. And that included a painstaking process to gather an understanding of what systemic issues credit unions pose.
Strangely, professional demand for transparency about credit unions remains nil in the world of Wall Street. No traded securities you see. But competitively, banks have noted that an increasing number of credit unions have taken on business models that compete directly with community banks for the same customers and that's begun to make them want to get a bead on these competitors a might more.
So after much bleary eyed staring at NCUA 5300 reports and talking to all manner of people about what keeps them up at night about credit unions, on June 1, 2012 Institutional Risk Analytics released our first credit union performance summary reports into our online tools systems. There are roughly 6,100-plus of them spanning some large institutions to truly small credit "unions" in the original sense of the description of these entities. Like IRA's bank engine, coverage is 100 percent. If it reports to its regulator, there's an IRA report on it. What does a portion of one of these look like?
| Profitability Indicator | ROA | Net Income | Total Assets | |||||||||||||||||||||||||||||||||||||||||||||||||
| Business Analysis
Business Efficiency Ratio tests the cost of operating versus available income. Lower numbers are better. | Lending Lending as % of Assets 28.29%
Texas Ratio Denominator Items:
| Investing Investing as % of Assets 66.71%
| Corporate Credit Unions Corporate Credit Union Exposure as % of Assets 3.80%
| Credit Union Service Organization (CUSO)
A CUSO is a subsidiary of the CU that handles loan, credit card and other servicing functions. | ||||||||||||||||||||||||||||||||||||||||||||||||
What does appear to emerge is that credit unions are on average somewhat more expensive to operate than banks. Many of them are stellar operations worthy of people's money. Still, not all of them are well run businesses but then again neither are all banks. Management philosophy runs the gamut and their asset allocation strategies are as varied as their bank cousins. The bottom line is that it is not a homogeneous industry and the industry deserves as much scrutiny by its members as banks do by their customers. As of today, it's not as opaque as it used to be.
Note that for the time being, the quality filter strips out the riskier banks from the zip code lists that marks the consumer protection aspect of the "Move Your Money" tool remains disabled for credit unions in the MYM free site. The MYM Courtesy CU finder tool shows all of them. I'm still working on that part.
Follow Dennis Santiago on Twitter: www.twitter.com/DennisSantiago
Do they sell the mortages to private investors or are the actually an orginator for Banks ?
I have a deep gut feeling that Banks are like snakes hidden in there sonewhere.
What this is doing is pushing consumers towards community banks that do offer services at lower minimum balances, credit unions which are similarly structured, and -- oddly enough -- to the biggest banks who can also offer reasonable packaging because they have the economies of scale to do so.
obviously, the best new-car rates-- always-- come from the manufacturer's financing ( Toyota credit, Ford credit etc).
No credit Union can come even close.
1. The CU operates in the black with a tiny net profit. This is typical for a CU.
2. Operational efficiency is average for a CU. It's a little on the high side but that is also typical for these entities.
3. Lending comprises only 28% of asset use. This is a fairly small percentage for a CU. Note that troubled loans are low which indicates this CU is likely discerning as to what loans it does make.
4. Investing takes up 2/3rd of the asset employment and of that virtually all of it is deposited in banks. That's over 50% of the member's shares.
5. The CU has exposure to Corporate Credit Unions and has been paying subsidy assessments to help keep them afloat.
6. With no CUSO of their own, this CU relies on outsourced infrastructure for it's servicing processes. Based on asset deployment, this could be a combination of CCU and/or bank computers providing the IT.
There's no judgement one way or the other here. The objective is to improve transparency. This particular CU won't lose your money. The question "Is this the credit union for you?" is a personal one. It could very well be or it might not. That's something for each individual to decide.
All in, there are over 7,000 banks and 6,000 credit unions in the United States. Are these smaller ones as big an economic driver as the top 20 mega-banks? Taken all together, the answer is yes. They are a diffuse but vital alternative to the TBTF's for consumers and as such the riskiness of these alternatives does seem to warrant better monitoring than has been available so far.
It's not always about pursuing the television ratings story when it comes to making grassroots change.
But...I do care about how transparent government is, and no business would ever be allowed to do what they get away with.
Of course, nitpicking on business is important, after all they earn money, never mind a govt. that is 16 trillion in debt and how that will affect us.
"So in other words you're not disturbed by rip off, deceit, and
loss of your capital...you're only opposed to it when
government does it. Right"