The Yukon legislature began to thaw its 30-year distrust of credit unions on Wednesday after pledging to study the potential of bank co-operatives in the territory.
A motion, sponsored by New Democrat MLA Todd Hardy, passed with the support of all members after a lengthy debate in the house on Wednesday.
It calls for all parties, labour groups, business representatives and Credit Union Yukon – a team of petitioners who spearheaded the proposal – to table a study on the feasibility of credit unions by November 30, 2010.
The Yukon has barred credit unions from operating since 1980, after its credit union ran out of money.
That experience made the Yukon the only place in Canada without credit unions.
Hardy touted credit unions for their social conscience, their democratic treatment of members and their resilience to the economic turmoil that began last year.
“Credit unions can provide better terms for loans because they are co-operatives,” said Hardy. “The money stays within the credit union and is recycled back through it, rather than for-profit businesses like banks.”
The motion was amended after members of the Yukon Party voiced concerns about whether the territory has enough capital to support a locally based credit union.
“In Yukon we have a very small population, and I’m not convinced it is currently a population large enough to support a local credit union,” said Energy, Mines and Resources Minister Archie Lang.
“I think that what we should be looking at is the possibility of a credit union from another province opening a branch here in Yukon,” said Lang.
Premier Dennis Fentie proposed an amendment that asks the study group to focus on the possibility of a credit union from Outside establishing a branch here.
While banks are regulated by Ottawa, credit unions are a provincial jurisdiction.
In most provinces, a central credit union acts like an umbrella organization to smaller credit unions. It provides large loans and financial security to the little guys.
Regular credit unions, like Vancity, cannot expand out-of-province, but central credit unions can.
Canada’s major banks have heavily lobbied the federal government to keep it that way, said New Democratic Party Leader Elizabeth Hanson.
Because of this, there’s a working group in the federal Department of Finance that’s looking at the creation of federally charted credit unions, said Hanson.
It would leapfrog the current rules governing provincial credit unions.
“We can press for federally charted credit unions,” she said after finding out about the working group when talking with people in the credit union industry in BC.
Fentie should lobby federal Finance Minister Jim Flaherty when he’s in town next week to discuss pension reform, she said.
If the creation of a new federal credit union in the Yukon flopped, a homegrown credit union or one imported from Outside would probably be the only other options.
“(The study group) might recommend the creation of a Yukon-based credit union, or it might give a broader mandate,” she said.
And while central credit unions don’t expand out-of-province much in practice, it’s still technically possible.
BC law doesn’t prohibit Central 1—which is a merger of Ontario’s and BC’s central credit union—from operating in Yukon, but the Yukon legislation would have to say it’s OK.
“What would be required is for the Yukon regulator to say that Central 1 is an appropriate place for the Yukon credit unions to deposit their reserves,” said Ian Smith, a spokesperson for Central 1.
“We would have to amend our constitution and our bylaws to allow Yukon credit unions to join, but that’s an internal administrative matter,” he said.
The only credit union to operate in the Yukon, the Whitehorse Credit Union Limited, received financial help from BC’s Central Credit Union before its demise in the late 1970s. It opened in 1957.
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