Central 1 Credit Union, Concentra Financial Services Association and Credit Union Central of Saskatchewan (SaskCentral) this week signed a memorandum of understanding (MOU) to explore opportunities to consolidate their trust services and wholesale financial lines of business.
The three organizations are in the initial stages of investigating whether increasing the collective scale and market reach of their wholesale finance and trust services will provide enhanced levels of service and new solutions to the credit union system and improve credit unions’ ability to compete with other financial institutions.
Central 1 and Concentra Financial are leading providers of wholesale financial and trust services to Canada’s credit unions. As the largest shareholder of Concentra Financial, SaskCentral is a key partner in the success of this initiative.
Credit unions are becoming larger financial institutions with more complex needs and credit unions now have the opportunity to become federally chartered. To effectively serve the needs of their members, credit unions of all sizes require innovative and scalable solutions that are available on a national basis.
The discussions will focus on whether consolidating services such as commercial lending, registered products, credit facilities, securitization and treasury services will better position credit unions to be successful in this evolving landscape, the organizations say.
There are no immediate credit rating implications stemming from consolidation discussions among the three credit unions centrals, but this may change if a deal becomes more likely, says DBRS Ltd.
In a research note, DBRS says, “At this point the nature of the consolidation discussion is very preliminary; as a result there are no rating actions being contemplated.”
However, the rating agency says that the ratings for each institution may be placed under review “if the discussions gain traction and the potential for consolidation becomes more evident.”
DBRS notes that the wholesale financial and trust services businesses have become increasingly important to the credit union sector, “given the heightened level of regulation and the need for greater financial sophistication to allow credit unions to compete with [banks].” And, it says that the consolidation talks appear to represent an evaluation of whether there is a benefit to combining resources into a single entity with “deeper expertise and greater market reach.”