Report: CU Branches Not a Direct Substitute for Bank Branches

A report the the Federal Reserve stated that credit union branches are not direct substitutes for bank branches, especially in rural America.

The study examined the closure of bank branches between 2012 and 2017. The report found that the number of bank branches declined by 7 percent across all counties during the time period studied.

While urban communities lost more branches than rural areas, the study noted that the effect of branch closures tends to be magnified in rural areas.

Participants in listening sessions described instances in which credit unions moved into or expanded their operations in the community in response to the closure of the local bank branch. Participants, who used a credit union, commented that credit unions were able to meet some of their financial needs.

However, some participants noted areas where their local credit union did not meet their financial needs.

For example, participants raised concerns about "a lack of robust small business account and credit products, overly restrictive lending policies, a lack of direct deposit services for employers, and low maximum cash withdrawal limits."

The study was not sure if these challenges identified by participants were due to the fact that the institutions cited were credit unions or these credit unions were smaller financial institutions with a more limited product and service offering.

The report also noted that when a bank branch is closed, the effects are not just limited to financial services access. Communities lose an important source of financial advice and civic leadership.

Read the study.