Credit Unions: Resilient but Large Institutions Remain a Key Vulnerability
The credit union sector recorded a strong recovery in 2024, though high concentrations of non-performing loans (NPLs) and below-average profitability in a few large institutions continue to pose risks to sector stability.
At a Glance
- Profitability: Net income increased by 24% ($3.9 million) in 2024, following a 30% ($6.9 million) decline in 2023.
- NPLs: Loan performance has improved since the pandemic, but NPL levels remain above pre-pandemic norms.
- Stress Testing: The sector remains broadly resilient under moderate economic shocks, though two large institutions fall below capital requirements under severe stress.
Loan Performance Improving but Elevated
While the overall level of NPLs has declined, it remains above historical averages. This is largely due to a small number of larger institutions holding a disproportionate share of overdue loans. Elevated NPLs reduce profitability and limit the ability of these institutions to absorb future shocks.
Stress Testing Highlights Large Institution Risk
The FSC’s macro stress tests assessed how the sector would perform under moderate and severe economic downturns. Results showed:
- Moderate Scenario: All credit unions maintained capital levels above the 4% minimum requirement.
- Severe Scenario: Two large credit unions, representing a significant share of sector assets, would fall below the minimum capital level and require additional capital injections equivalent to 0.03% of GDP in 2026 and 0.04% in 2027.
Sector Outlook
Overall, the sector’s resilience has improved over the past year, supported by higher provisioning and slightly stronger capital positions. However, the concentration of NPLs and lower profitability in the largest institutions continues to be a key area for ongoing monitoring and risk management.
Read more in the 2024 Financial Stability Report. Click here to download.
