Dec 06 2006

A Comparison of the Deposit and Loan Pricing Behavior of Credit Unions and Commercial Banks

Report  
Number  
126

Do banks and credit unions price their loans similarly, or are there significant differences among financial institutions? This report aims to answer this question. 

Dr. William Jackson III
Financial Economist and Associate Policy Advisor
Federal Reserve Bank of Atlanta
Report Number 126

Executive Summary

William Jackson previously studied bank and credit union pricing movements for Filene Research Institute and concluded that banks and credit unions price their loans and deposits in a different manner. Banks, Jackson asserted, exhibit profit-maximization pricing movements, while credit union pricing movements are consistent with their not-for-profit structure. The study you are about to read is a continuation of Jackson’s research on credit union versus bank pricing. Specifically, he examines pricing data on a more granular level both in terms of markets and types of deposit and loan products.

What is the research about?

This research examines pricing data on a more granular level in terms of both markets and types of deposit and loan products, comparing credit union and bank pricing data on several different types of deposit and loan products in the U.S. as a whole and in nine specific markets from California to Massachusetts.

What are the credit union implications?

Credit unions are always looking for a way to effectively illustrate the credit union difference. All too often credit unions express their difference to policy makers and stakeholders with such important (but ultimately intangible) items as “great service” and “co-operative ownership.” Now, with this study and others by Filene, you can empirically confirm credit unions’ pro-consumer behaviors. In addition to the public policy implications of this study, credit union executives can dig into the pricing behaviors of commercial banks. You will likely discover a great deal of insights about the differences in credit union and bank pricing behaviors that you can leverage for your credit union’s pricing strategies.