The Credit Union Industry—An Overview - Brief overview of natural-person and corporate credit unions

Sep 21, 2026

Uploaded by Maeve

Provides an overview of the U.S. credit union industry, explaining why credit unions are distinct from commercial banks and how they have grown despite being smaller in assets. Describes the structure and regulatory environment, including the natural-person charter system and the role of a common bond among member groups. Traces historical development and presents key safety-and-soundness considerations. Also outlines corporate credit unions and the corporate credit union network.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages5

Reading Time13 min

AccessFree to download

The Credit Union Industry—An Overview

Natural-Person Credit Unions

Corporate Credit Unions

by Barbara A.Good U.S.financial industry,serving morethan 68 million people.Although thepercentage of assets under their controlis dwarfed by that of commercial banks,credit unions have some unique charac-teristics and have evolved into increas-ingly competitive,customer-orientedproviders of financial services.Theirgrowth rate during this decade has beennoteworthy:While commercial banks'share of industry assets has declined,credit unions have experienced signifi-cant growth. One special feature of the market is thecorporate credit union;before January1995,few outsiders had ever heard ofone.Although corporate credit unionsachieveda moment of fame with thedemise of Capital Corporate CreditUnion in Lanham,Maryland,which han-dled the investments of the White HouseEmployees and Pentagon EmployeesCredit Union,most people are still unfa-miliar with credit unions'role in thefinancial marketplace.To understandtheir purposes and functions,one mustunderstand the structure of the industryand the regulatory environment underwhich it operates. # Crei unions ly acnucia rolein he ISSN0428-1276 # The Credit Union Industry—An Overview ## ■ Natural-Person Credit Unions Like commercial banks,mutual savingsbanks,and thrifts,credit unions aredepository financial intermediaries.Bystatute,they have historically beenrestricted to providing services only tothe consumer market,in the form of sav-ings accounts and personal loans.Theirservices are not available to the generalpublic,since their charters require a busi-ness plan directed at groups that have acommon bond,such as occupation,asso-ciation,or residence.They are legallydesignated as “"natural-person"creditunions,because their members are indi-viduals.From a financial standpoint,thetax benefits that most credit unions enjoyare the chief difference between themand other financial service providers. Credit unions date back to mid-nineteenth-century Germany,and theconcept migrated to the United States inthe early 1900s.In 1909,the first creditunion gained legal status in Manchester,New Hampshire,through a special act ofthe state legislature.Massachusettspassed the first credit union law thesame year.The Massachusetts lawdefined a credit union as a “cooperativeassociation formed for the purpose ofpromoting thriftamong its members,"and adopted the principle of memberdeposits financing membe loans. The rapid development of consumeractivism and labor organizations duringthis time dovetailed with the credit May 15,1996 In recent years,the credit unionindustry has grown faster than anyother financial intermediary,addingmore than $100 billion in assetsbetween 1988 and 1995.Still,manypeople remain unfamiliar with creditunions'purposes and functions.ThisEconomic Commentary introducesreaders to the industry's structureand regulatory environment,andtakes a brief look at some safety andsoundness issues. unions'"common bond"concept.Thenew institutions were welcomed as analternative to loan sharks as well as tra-ditional financial establishments likebanks and building societies.The indus-try experienced real growth in the 1920s,in tandem with the general prosperity ofthat time.Later on,expansion resultedfrom improving economic conditions,legislation,and changing demographics,as well as the 1934 passage of the Fed-eral Credit Union Act.In recent times,this industry has grown faster than anyother financial intermediary;it nowserves more than 68 million customers.² Though overshadowed by commercialbanks,thrifts,and other banking-typecompanies,credit unions are emergingas attractive choices.At the end of 1995, 11,887 credit unions were operating inthe United States,with aggregate assetsof $312billion(see figures 1 and 2). Although consolidations and closures inthe last decade reduced the number ofcredit unions,this sector's assets con-tinue to grow at a faster rate than thoseof commercial banks(see figure 3).Credit unions now outnumber commer-cial banks,although their aggregateassets total l

FAQs

What makes credit unions different from other financial intermediaries?

Credit unions are depository intermediaries with tax benefits and membership restrictions based on a common bond. Their services are tied to charters aimed at specific groups rather than the general public.

How are natural-person credit unions organized and regulated?

Natural-person credit unions operate under rules set by federal or state charters, covering application requirements, purpose, membership, branching, and regulatory supervision. Members are individuals, and services are generally limited to eligible groups.

What is a corporate credit union (CCU) and what role does it play?

A CCU is a credit union for credit unions, providing investment, settlement, and liquidity services. It can also act as a bankers' bank, offering deposit acceptance, lending, check clearing, and automated clearing-house processing.

Sep 21, 2026

Uploaded by Maeve