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Credit Union History & Traditions

Credit Union Risk Management Principles, History & Traditions

Credit Union Risk Management (CURM) is not just a program or presentation, it's a "method of management" designed to identify, measure and control risks created by credit union operations. There are two "types" of risk, pure and speculative. Pure risks (burglary, robbery, fire, disasters, etc.) result only in loss - never a gain. Speculative risks hold out the possibility for gain as well as loss. For example, speculative risks include any new policy, procedure or law. You hope for gain when new laws are passed, but face the real possibility a loss will occur if all speculative risks are not controlled. There are five risk control tools used in the following order: Avoid, Reduce, Spread, Assume, and Transfer.

Credit Union Risk Management has been around since Friedrich Wilhelm Raiffeisen, considered the founder of the credit union movement, launched his first lending society in 1849 and his first truly "cooperative credit society" in Heddesdorf, Germany in 1869. Raiffeisen saw an immobile class structure in which exploitative capitalists dominated the poor. Bankers had one approach to managing consumer lending risks: If you wanted credit, you had better come up with an equal amount of collateral. Raiffeisen speculated that if he formed a cooperative, run by volunteers from the cooperative's field of membership, loans could be approved based first on a member's character, then upon ability to repay, and only as a last resort, on collateral. It worked! The movement adopted the "3-C" slogan; Character first, Capacity second, and Collateral last.

Credit union cooperatives spread from Germany to England, France and Italy and then to Canada thanks to a Canadian journalist, Alphonse Desjardins, who was promoting a form of credit associations in Quebec called caisses populaires (people's banks). The first credit union in North America was organized at Levis, Quebec on December 1, 1900. As luck would have it, in 1908, Desjardins was invited to speak to a group of Boston businessmen about the feasibility of credit unions in the US. Edward A. Filene was in his audience

The Evolution of the US Credit Union Movement

Edward A. Filene is considered the founder of the US credit union movement. A successful merchant in Boston (Filene Stores), he was willing to put up his own money when needed to help his employees stabilize their financial future and create for them economic opportunities. Filene, enlisted the help of a young lawyer, Roy F. Bergengren, and together they set out to organize credit unions, form chapters, promote State leagues and finally, in August of 1934, he assembled the leagues in Estes Park, Colorado to form the "Credit Union National Extension Bureau. Later named the Credit Union National Association (CUNA Inc.).

CUNA Mutual - "The Debt Shall Die with the Debtor"

Small fledgling credit unions of the 1930s all faced the risk they'd loan too much to one person and go insolvent if that person died before the loan was repaid. Therefore, in 1935 State Credit Union Leagues, represented by CUNA, Inc. returned to Estes Park and formed CUNA Mutual Insurance Society to provide credit union members with Loan Protection and Life Savings insurance. This allowed the movement to adopted the motto, "The Debt Shall Die with the Debtor." Roy F. Bergengren became the first Managing Director of the CUNA Mutual Insurance Society (1935-1945). So started the evolution of what today is the CUNA Mutual Group (CMG). CMG is the fifth control tool of Risk Management, "transfer." Risks credit unions can't avoid, reduce, spread, or assume get transferred through insurance or bond products created by CMG. I recommend you obtain a copy of "The Debt Shall Die with the Debtor - The Story of CUNA Mutual Insurance Society" through your CUNA Mutual representative.

CUMIS - The Credit Union's Bonding Company

In the early 1960s, CUNA Mutual, supported by CUNA Inc. and State Leagues, formed a property and casualty company (CUMIS) to provide the movement with fidelity bond products. Over the years, CUMIS bonds have evolved to fit the special needs of credit unions around the world. By 1968, the society was serving credit unions in thirty-five countries.

Credit Union Risk Management - A Department

To underscore the importance of Risk Management methods, CUNA Mutual and CUMIS jointly funded a Credit Union Risk Management Department starting in the mid 1960s. The program was offered as a service of CUNA Inc. and US Credit Union Leagues. Credit union leaders adopted Risk Management standards focused on building a strong movement from the "grass roots." Executives such as J. Orrin Shipe, Herb G. Wegner and Ralph Swabota from CUNA Inc., and CUNA Mutual Presidents Charles F. Eikel, Jr. (1964 - 1973) and Robert L. Curry (1973 - 1988) all advocated Credit Union Risk Management methods to control losses and grow a strong grass roots movement. Risk Management programs were driven from the beginning by a young college professor of Risk Management at the University of Wisconsin, Madison, Wisconsin, Doctor Richard M. Heins. Dick Heins became President and Chief Executive Officer of the CUNA Mutual Insurance Society in 1988. That same risk management program, born in the 1960s is still working with credit unions on a daily basis throughout the US. I encourage you to visit the CUNA Mutual web site and take advantage of the many risk management brochures, the SCAM Alert program, and other excellent risk management services they provide.

CUNA International - The World Council of Credit Unions

In 1970 the World Council of Credit Unions (WOCCU) replaced CUNA International as the governing body of the world credit union movement. WOCCU has carried risk management methods, principles, and standards to the world movement. Thanks to WOCCU, credit unions from Wisconsin to Sydney to Dublin to Kingston to Montreal to Asia and to Eastern Europe have joined forces to combat losses and strengthen our global community.

The Filene Research Institute - 1989

Thanks again to the vision of Doctor Richard M. Heins, the Filene Research Institute was launched in September 1989. The purpose of the Institute is to perform theoretical investigations and research on consumer behavior, financial service needs, and organizational behavior, as well as, study the relationships credit unions have to others in the financial services industry. David Chatfield, now President/CEO of the California Credit Union League, was the first Executive Director of the Institute, which is now being directed by the highly respected Bob Hoel.

A Multitude of Credit Union Associations

There is a multitude of professional credit union associations focused on the best interest of the movement. You'll find a link to most at RichWoldt.com. If you're going to succeed as a credit union risk manager, join and support as many of these associations as you can. For it is by coming together that we grow, joining together that we make progress, and working together that we succeed.