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Meridian Credit Union: A Threat To The 'Big Five' Banks?


Meridian Credit Union has announced plans to launch a new online National bank.

The new bank will launch in 2018 and will provide an alternative to the big banks.

Meridian bank may pose a threat to the growth profile of Canada's "Big Five" banks.

An interesting development recently took place in Canada's banking system as Meridian Credit Union announced their intention to open a National online bank. The question now becomes whether or not the newly formed subsidiary of Meridian Credit Union will have a material impact on the Canadian Banking system. In particular, how will the new bank impact the growth profile of Canada's "Big Five", Royal Bank of Canada (NYSE:RY), Toronto-Dominion Bank (NYSE:TD), Bank of Nova Scotia (NYSE:BNS), Bank of Montreal (NYSE:BMO) and CIBC (NYSE:CM)?

Credit Unions vs Banks

Credit Unions are co-operatives which are 100% owned by their members. Their purpose is to return profits to their members in the form of higher savings and lower interest rates. Furthermore, Credit Unions are often actively engaged in local communities and are generally known to provide a higher level of service as compared to the big banks.

Unbeknown to most, the Credit Union sector in Canada is very prominent with over 5 million members, which equals about one-fifth of Canada's population. Canada's largest Credit Union is Desjardins Group which has operations in both Ontario and Quebec and as of December 31, 2015 had assets of 248.1 billion. Its assets in the province of Quebec have grown to the point where it has surpassed the Big Five banks and is now the largest financial institution in the province.