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Consolidation of the Financial Services Industry: Implications for Credit Unions

A summary of a colloquium, held at Stanford University with two key papers that were presented at the colloquium around the topic of credit union consolidations.

Executive Summary

The effect of mega-banks on credit unions has become an increasingly compelling issue as financial services consolidation continues to accelerate. To address this issue, the Filene Research Institute; the Center for Credit Union Research, University of Wisconsin-Madison; Graduate School of Business, Stanford University; and Stanford Federal Credit Union jointly sponsored a colloquium, held at Stanford University in March 1999. This monograph contains two key papers that were presented at the colloquium, as well as selected portions of the discussion of participants. Those participants included a mixture of credit union CEOs and academics.

What is this research about?

The first paper in this volume, Financial Consolidation: Implications for Small Financial Services Firms and their Customers, summarizes key consolidation trends in the financial services industry since 1988 and the underlying causes for these changes.

The second paper, Consolidation of Financial Services Industries in Europe: The Response of German and French Credit Unions, provides tangible and thriving examples of European credit unions successfully completing with local credit unions.

What are the credit union implications?

There are clear opportunities for credit unions to operate at a variety of successful sizes using local roots, personal service and cooperation. The option of merging into very large organizations that work alone is the traditional choice of banks. Studies of competitive strategies show that those, which attempt to avoid competition, are ineffective. A better strategy is to embrace competition as a dynamic, changing presence, but to maintain an advantage by competing from a position of strength.