This column describes for-profit banks, which hold over
95% of total state-chartered bank assests in the state.
Account holders are called “members.” Each member is part
owner of the credit union. Credit unions are also required to
serve a defined Field of Membership, based on a common bond of
employment, association or community. Bylaws further define for each
credit union the common bond requirements it must meet. Credit unions
may serve only the members who fit these parameters
Banks can serve anyone in the general public, but their account
holders have no ownership interest in the institution. Banks are owned
by investors who may or may not be account holders.
Credit unions are not-for-profit – in business primarily to
serve their members. If a credit union has excess earnings after reserve
requirements are met, those earnings are used to offer the members lower
interest on loans or higher interest on savings, to offset costs so as
to limit the need for fees, or to develop new products and services for
the membership. Excess funds can also be paid back to members as a
Banks are for-profit, meaning their primary purpose is to generate
profits for their stockholders. In banks, only the stockholders –
not account holders – get a share of the profits.
Credit unions are democratically controlled, meaning each member has
a say in how the institution is operated. Credit union directors are
volunteers elected by and from the membership. Each member, regardless
of how much money they have on deposit, has one vote in electing board
members. Members can also run for election to the board.
At banks, only stockholders have voting privileges. Account holders
don't have voting rights, cannot be elected to the board, and have no
say whatsoever in how their bank is operated. Bank directors are paid,
though they may not be from the same community the bank is in and may
not even use the bank’s services.
Compensation for credit union chief executives is far below that of
bank CEOs; the average credit union chief earned just $77,490 in salary
and benefits in 2005. Sixty percent of the federal credit union CEOs
examined had total compensation of $75,000 or less while eighty percent
made below $100,000 in total compensation.
On average, annual bank CEO compensation (at $353,000) is more than
four times greater than what credit union chief executives earn. But
even comparing like-sized institutions, credit union execs earn less:
small bank CEOs make almost two and a half times what CEOs of small CUs
earn and large bank chiefs make almost one and a half times what CEOs of
like-sized CUs earn.
Credit union accounts are insured to at least $250,000 by the
National Credit Union Share Insurance Fund (NCUSIF). The fund is managed
by the National Credit Union Administration, an agency of the federal
Banks accounts are also insured to at least $250,000. Their
insurance fund is called the Federal Deposit Insurance Corp., also an
agency of the federal government.