THE ECONOMICS OF MONEY,BANKING, AND FINANCIAL MARKETS 308

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PA R T I I I

Financial Institutions
account). The Qu bec Deposit Insurance Board (QDIB) insures deposits for
Qu bec TMLs on terms similar to the CDIC s.
Trust and mortgage loan companies are funded almost entirely by chequable
and nonchequable savings deposits, term deposits, guaranteed investment certificates, and debentures; together, they account for about 85% of the balance sheet.
Their risk asset portfolio is made up mostly by residential mortgages and personal
loans; together they account for about 60% of assets. The low-risk assets are largely
in short-term paper and Canadian bonds.

Cooperative
Banks: Credit
Unions and
Caisses
Populaires

Cooperative banks are small lending institutions organized around a particular
group of individuals with a common bond (union members or employees of a particular firm). Alphonse Desjardins formed Canada s first cooperative bank in 1900
in Qu bec, and it was based on the cooperative movements in Europe, which,
among other things, stressed the provision of credit to the little man. Today,
there are two cooperative financial systems in Canada: the caisses populaires system in Qu bec and the credit union system in other parts of the country.
There are about 1000 credit unions and caisses populaires in Canada, with
almost 10 million members and more than 60 000 employees, carrying on retail
financial services businesses. Because their members share a common goal, credit
unions and caisses populaires are typically quite small; most are about the size of
a single bank branch and hold less than $10 million of assets, with the largest being
VanCity Savings with assets close to $6 billion. The credit unions and caisses populaires are established under provincial legislation and are non profit-seeking
financial institutions. Unlike chartered banks that accept deposits from and lend

funds to the general public, the cooperative banks accept deposits from and
lend funds only to their members. Members have voting rights and elect a board
of directors, which determines the union s lending and investment policies.
As member-owned, independent financial firms, credit unions and caisses populaires constitute an alternative financial system, different from the profit-seeking
banking system. They have also developed their own set of institutions, including
central banking and deposit insurance arrangements. In particular, each province
has a central credit union, owned by the member credit unions, that provides
financial services to individual credit unions. All central credit unions outside
Qu bec are members of the Credit Union Central of Canada (CUCC), also known
as Canadian Central. The Canadian Central serves as the third tier for the credit
union movement; it coordinates various functions and provides cheque-clearing
services for all provincial central credit unions.
In Qu bec, caisses populaires are assembled under a single federation, the
F d ration des caisses Desjardins du Qu bec, which has a similar structure to the
provincial central credit unions in the rest of Canada but with considerably broader
regulatory responsibilities. The federation dominates retail and corporate financial
intermediation in Qu bec. It owns a major P&C insurance group, Desjardins General
Insurance; a life and health insurance company, Desjardins Financial Security; a venture capital firm, Desjardins Venture Capital; and an investment dealer and discount
brokerage, Desjardins Securities and Disnat. It also owns Caisse centrale Desjardins,
which functions as a central bank, as the CUCC does for the rest of Canada.
Credit unions and caisses populaires are not directly covered by the CDIC.
However, each provincial government has an agency, commonly called a stabilization fund, which has a line of credit with the provincial treasury and provides
deposit guarantees for credit unions. Deposits in New Brunswick and Prince
Edward Island are insured up to $60 000 per account, in Ontario and British