[causality0]

I exclusively use a credit union, but frankly I could not tell you whether it's more or less vulnerable to market instability or bank runs than a larger bank. It might be more stable for the sheer fact of being very local and nobody around here really cares what's going on in big cities or in silicon valley.

[toast0]

Many of the credit unions I've looked at don't allow commercial accounts. There's not a whole lot of need for people to hold more than the deposit insurance amount in one institution, whereas it does make sense for many companies. If more of the deposits are covered by deposit insurance, I think there's less of a risk of a bank run --- I wouldn't try to get a significant amount out of my accounts even if I knew the credit union was going to fail, because I know I can get it all on the Monday after it fails; guaranteed by NCUA, backed by the US Government. Still, I think a significant run would likely cause the credit union to fail, it's not easy to provide 20% of deposits on one day.

Some credit unions do provide service to businesses though. So they might have similar concentration of account issues.

[dhosek]

You’re assuming rationality on the part of depositors. I remember there being a run on a local savings and loan in the town where I grew up when I was in my 20s. I knew a few people who had money in CDs, well below the insurance amount, who took the early withdrawal penalties to take their money out of the S&L even though they were insured and their was no chance of any loss if they just held tight. Sort of like all the people who panic sell at a loss when the stock market dips.

[toast0]

I mean, if people run, the bank or credit union will fail. But people are fundamentally lazy and there's not much of a difference between getting your money on thursday and the next monday, so there's less urgency. People are also fundamentally panicy too, so I agree there's still a risk.

Stock market 'circuit breakers' that halt trading when the stock moves too fast seem to be pretty helpful. Maybe banks need something that halts withdrawals when they reach 10% of last reported deposits. (Spit ball: each depositor may withdrawal at least 10% of their current balance or last two statement balances, whichever is more, any excess is allocated on a dollar basis across the day's withdrawal requests. Some mechanism to pre-request funds so you can be sure you can wire large payments for houses, etc)

[dhosek]

Edwards: Why the big secret? People are smart. They can handle it.

Kay: A person is smart. People are dumb, panicky dangerous animals and you know it. Fifteen hundred years ago everybody knew the Earth was the center of the universe. Five hundred years ago, everybody knew the Earth was flat, and fifteen minutes ago, you knew that humans were alone on this planet. Imagine what you'll know tomorrow.

[UncleOxidant]

> It might be more stable for the sheer fact of being very local

Being very local (and concentrated on one sector) didn't help SVB. Most credit unions require (or used to) you to be in some industry or union, etc to join. Like teacher's credit unions, etc. So potentially there would be sector exposure. But I think in recent years most CUs have relaxed those requirements (I know the one I'm in did) and allow pretty much anyone to join.

[Scoundreller]

Usually the key words you're looking for here are "open-bond" (open to all, but sometimes still geographical restrictions) vs. "closed-bond" (ethnicity, occupation, religion)

[SkyMarshal]

It seems possible any deposit-taking financial institution could have made the same mistake as SVB, be they a bank or credit union or anything else. I don't think merely being a credit union will shield them from this. They may have some by-laws though that do protect them, but that's on a case-by-case basis.

[FormerBandmate]

You can look up call reports to see how much exposure they have to long-dated treasuries. Most major credit unions have almost nothing, and they also don’t have nearly the amount of depositors above $250k so they’re not really vulnerable to bank runs

[SkyMarshal]

Thanks. Looks like you can find call report data for all credit unions here:

https://ncua.gov/analysis/credit-union-corporate-call-report...

[triyambakam]

Can anyone clarify how to look at this data? There are a few different reports. What would I look for to see how healthy my credit union is?

[crabmusket]

*by-laws

[SkyMarshal]

Thx, fixed :)

[andrepd]

I remember reading credit unions were significantly less likely to go bankrupt than banks during the 2008 meltdown. In fact:

> From 2008 through 2012, 481 FDIC insured banks were either liquidated or merged with healthier institutions. Credit unions, on the other hand, saw 136 involuntary liquidations or assisted mergers at the hands of the National Credit Union Share Insurance Fund (their version of the FDIC), among 6,940 FDIC institutions compared to 6,815 U.S. credit unions.

[justin66]

> frankly I could not tell you whether it's more or less vulnerable to market instability or bank runs than a larger bank

For starters, there is not a conceivable credit union equivalent to VCs telling all their companies to withdraw all they can from their bank on a single day. Credit unions can offer business accounts as well as individual accounts... but still.

[AH4oFVbPT4f8]

I would think if a bank if FDIC and you have less than 250k there, you would be fine.

[latchkey]

Not FDIC insured is a big one.

[UncleOxidant]

The National Credit Union Administration is a US government agency that regulates and supervises credit unions. They also operate and manage the National Credit Union Share Insurance Fund (NCUSIF), which provides share insurance coverage for credit union members against losses should the credit union fail. The NCUSIF provides all members of federally insured credit unions with $250,000 in coverage for their single ownership accounts.

So pretty much the same coverage, just a different agency.

[TulliusCicero]

How is this functionally different?

> What Is the NCUA?

> The NCUA is an independent agency that oversees the National Credit Union Share Insurance Fund (NCUSIF). This federal insurance fund, backed by the U.S. government, insures member savings in federally insured credit unions. Deposits at federally chartered credit unions are automatically insured by the NCUA, but state-chartered credit unions can opt for NCUA insurance too. Some 98% of U.S. credit unions are federally insured. To find out if your credit union is one of them, ask a representative or look for the official NCUA insurance logo in its offices or on its website.

[latchkey]

It is a different organization entirely. Functionally it is declared the same in all the googling that I've done, but in practice, are they? I don't know, and personally, I don't really want to find out.

[kerkeslager]

This post made me chuckle. It's basically: I don't know about it, therefore it's scary!

But like, what do you know about the FDIC that you don't know about the NCUA? I suspect to most people they're both just opaque blobs of the US Federal government that insure deposits up to $250,000, and that's the limit of most people's understanding of either organization. If you're not confident in the NCUA, I'm not sure what extra information you could possibly have that would make you suddenly confident in the FDIC.

[latchkey]

> I don't know about it, therefore it's scary!

What's wrong with that? Seriously, belittling someone because they don't know about something, so therefore they'd rather avoid it, doesn't seem right either.

I know about FDIC. I understand the rules. My bank has a great explainer on their website about the coverage. I don't know anything about NCUA and I don't care to learn, because I'm already protected at the bank that I'm at.

[toast0]

> I know about FDIC. I understand the rules. My bank has a great explainer on their website about the coverage. I don't know anything about NCUA and I don't care to learn,

The rules are pretty much the same. A credit union is likely to have the same kind of explainer that tells you the same stuff, except there's magic words like 'share account' instead of 'savings account' and 'member' instead of 'account holder'. And credit unions have to have some 'affinity' requirement. Most credit unions these days just have a geographic requirement (live, work, or worship in a list of counties), but some require a connection to some company or organization, but for otherwise national credit unions, there's often a 'loophole' way to get affiliated; you can often make a trivial one-time donation to become a member of an affiliate supporting organization and then get into the credit union. There's a little bit of smoke and mirrors there, to support the creative fiction that credit unions aren't just banks, but they pretty much are. Just like banks, some are good and some are bad, some will fail in the near future, some won't, and deposits under the $250k threshold are explicitly insured. Updates to rules that affect banks usually lead to updates that affect credit unions, but it sometimes takes a little while longer.

You'll also get notices about board of supervisors elections, which you won't for a bank with stockholders, but might get for a mutual bank.

[1123581321]

It’s wrong because you weren’t just trying to avoid it personally; you were trying to scare others away by confidently declaring a problem (“a big one”) while knowing you were ignorant about it.

[kerkeslager]

My intent wasn't to belittle anyone and I apologize if it came across that way.

[delfinom]

Yes, the NCUA enforces regulatory standards including auditing for credit unions to remain insured.

Actually in many ways the NCUA is a bit more open about their work.

Here's the NCUA informing all credit unions back in 2022 that risk assessments are changing to factor in the sharp rising interest rates affecting asset values.

https://ncua.gov/regulation-supervision/letters-credit-union...

Want to know their enforcement history? Bam https://ncua.gov/news/enforcement-actions/administrative-ord...

[IncRnd]

The NCUA is the US Federal Government Agency that oversees Credit Unions.

A Credit Union is not the same as a bank, since a CU is member-owned and member-controlled.

[pdonis]

FDIC insurance just means that, if a bank fails, the government will make depositors whole up to a certain amount--printing the money to do so if necessary. NCUA provides exactly the same guarantee to credit union depositors. I see no reason to be any less confident in the NCUA guarantee than the FDIC guarantee; ultimately both are subject to the same risk, that the government will not be politically capable of either raising or printing enough money to make depositors whole in the event of a major financial crash.

[binarymax]

This is not necessarily true, there are over 7000 federally insured credit unions in the USA.

Credit unions are required to maintain coverage for all deposit liabilities.

So it can’t be undone by a bank run, but potentially could be undone by theft if uninsured.

[readthenotes1]

"Credit unions are required to maintain coverage for all deposit liabilities."

So are banks.

What fraction of total deposits must be held in cash?

[jcrawfordor]

Credit unions are subject to essentially the same capitalization requirements as banks---they're regulated by NCUA, but NCUA's capitalization requirements are largely harmonized with those of other bank regulators. It's important to understand that banks themselves are not all regulated by the same agency, with bank regulation split between FDIC, OCC, and the FRS depending on the bank (this is mostly unrelated to FDIC insurance which applies to depository financial institutions regulated by OCC and the FRS as well). These different regulators all apply somewhat different supervision methodologies, with the result that banks do indeed "shop around" for a regulator that they feel will work the best as a long-term relationship. But the overall capitalization ratio requirements are mostly the same at 7-10% being well-capitalized depending on calculation method.

But this discussion is more about insurance, not capital reserves. Credit unions are required to hold insurance (coverage) on their deposits just like banks, with the same cap of $250,000 per account. Most, but not all, credit unions are insured by NCUA, backed by the US government. All federally chartered credit unions are insured by NCUA, but state-chartered credit unions are not necessarily required to be. The majority of state-chartered credit unions are also insured by NCUA, but they have the option of obtaining their insurance by other means, and some choose to use private insurers like American Share Insurance. These private insurers are usually backed by a huge reinsurer and so the risk of them not meeting their obligations is low, but arguably higher than NCUA. On the flipside, private share insurers sometimes offer higher coverage limits than NCUA. It's mostly a minor issue though as credit unions covered by other than NCUA are uncommon, and NCUA-insured credit unions prominently post the NCUA logo. Similarly, non-NCUA credit unions are required to disclose their insurer.

Federally-chartered credit unions usually use "Federal" in their name although some don't use it in their general advertising and logotype any more. State-chartered credit unions only exist in some states, but California charters credit unions and as you'd imagine there are quite a few examples in that state. There are even "dual-chartered" credit unions in some states that hold charters from both state and federal governments. This is the norm in e.g. Washington due to some banking regulation history. Older credit unions are more likely to be state-chartered as the federal system is newer than most state systems, but credit unions didn't really take off until the Federal Credit Union Act so there's still not that many of them.