In this research report, the authors investigate the recording, monitoring, and reporting of issued loans and delinquency by Canadian and US credit unions. This is done by determining whether commercial lending presents higher risks to the credit union than consumer lending; whether credit unions utilize adequate risk monitoring measures, such as the North American Industry Classification System (NAICS) for commercial loan categorization and the identification of sectoral risk; and the extent that collaboration and cooperation among credit union can reduce risk.
In recent years, there has been significant growth in commercial lending by Canadian and American credit unions. While commercial lending represents an important area of revenue growth, it is not without potential risk, particularly for small and medium- size credit unions.
Our research found that reporting of commercial loan delinquency is recorded in aggregate format rather than by industrial sector, thereby limiting the opportunity to monitor and identify risky sectors. This report examines risk exposure related to recording, monitoring, and the reporting of loan concentrations and delinquencies.