Restructuring of credit unions will bolster them for future or compound their weaknesses

At the same time, the Central Bank has established “ReBo”, the Credit Union Restructuring Board, with Canadian Bobby McVeigh at the helm. A statutory body, it has a lifespan of three or so years, and its function is to oversee and assist in any mergers or closures.

With almost 400 credit unions, it has been suggested that this process of matching up financially troubled credit unions with their stronger counterparts could see the total number halved.

But Johnson warns that ReBo’s goal should not be to pursue a broad rationalisation simply for the sake of reducing the number of credit unions.

Other industry players have suggested the sector should adopt a co-operative model successful in other countries.

‘Arranged marriages’

Initially, it’s likely that the board will encourage credit unions to come forward themselves with proposals on how they might be strengthened. But if this isn’t forthcoming, it will have to act itself. As Jackman notes, “arranged marriages aren’t always the best”. For him, any such mergers will require a “clever bit of artistry” to ensure a credit union with capital strength but low membership is matched up with one that has a large membership but weak financial position.

To help shore up the credit unions’ balance sheets, a fund of €250 million has been put aside by the Government.

“It sounds a lot, but it’s not that much,” says Jackman. “It will be up to the sector to use that as intelligently as possible, without falling into turf wars.”

The success or otherwise of ReBo will also likely be complicated by the forthcoming Personal Insolvency Bill. Those in financial trouble will be able to write off up to €20,000 in personal unsecured debt, and it could have a disproportionate impact on credit unions.

But with more bank branches lying vacant, and banks offering reduced services and higher charges, there is a gap credit unions could fill.

However, some would argue the sector has failed to modernise and embrace a younger generation. It has made poor lending decisions, been too slow to adopt new technology and move into new areas.

Now the sector is being restructured through consolidation – but this may just be combining problems. Only time will tell.

On the agenda Imminent change

Introduction of a fitness and probity regime: this will start being put in place from July 2013

The Personal Insolvency Bill: with potential write-downs of loans up to €20,000, it may have an overwhelming effect on credit unions

Appointment of a new credit union registrar

Restructuring of the sector by 2016: the Central Bank has established “ReBo”, a board to drive change under Canadian Bobby McVeigh

€250 million fund: aimed at shoring up balance sheets.