FEDERAL WAY, Wash. (6/10/13)--All major claims made by critics of credit unions about an uneven playing field are unsubstantiated, according to an economic analysis released Friday. The study also found there is "no evidence that state and federal tax policies give credit unions unfair competitive advantages over banks."
"Credit Unions vs. Banks: The Myth of the Uneven Playing Field" is authored by
ECONorthwest's Randall Pozdena, managing director and senior economist, and Michael Wilkerson, senior economist. The report was commissioned by the Northwest Credit Union Association.
The independent economic analysis was commissioned after bank trade associations in Oregon and the U.S. lobbied to eliminate not-for-profit credit unions' tax-exempt status in the state and in Congress.
"In our view," wrote the authors, the difference in organizational forms of credit unions and commercial banks, the asymmetry of powers enjoyed by the respective institutions, and the trends in credit union development are not consistent with the claim that credit unions enjoy unfair competitive advantages."
In the study, they reviewed the theory and historical performance of credit unions then statistically tested where there is a comparative performance difference based on the adoption of the community common bond membership criterion, or credit unions' exemption from corporate income taxation.
"All the major claims made by critics of the credit union industry are unsubstantiated," said the report. Contrary to the claims of banks, the study concluded:
The authors said their "review of the theory, data and formal statistical analysis does not offer support for disturbing the tax policy and provides room for charter enhancements of credit unions. Indeed, to disturb the tax policy and limit the charter evolution of the not-for-profit cooperative may eliminate a small, but important class of institutions that theory says should be able to better manage risk and provide benefits to consumers than investor-owned commercial banks under the right operating conditions."
For the full report, use the link.