Central Bank report criticises credit unions

The Central Bank has published a strongly critical report on credit unions.

Having visited 200 credit unions, the bank decided that the majority of them need to make significant improvements.

In her introduction to a report called Credit Union Prism Risk Assessments, the registrar of credit unions, Sharon Donnery, said the bank had found sound standards and evolving good practices in a number of credit unions that could serve as models for others.

The report said it was notable that the well-run credit unions had a proactive, positive attitude to compliance “which contrasted with the tick-box behaviours of certain of their peers.

“For most credit unions visited, we were concerned about the fundamental nature of weaknesses we identified in governance, lending, operations and risk management.

“We also noted in a small number of cases certain attitudes and behaviours indicative of an unwillingness to comply with legal and regulatory requirements and associated absence of appropriate risk management systems and compliance programmes.”

Dialogue
The report said the Central Bank had expected a more informed and developed dialogue around strategy on business model viability challenges.

“Indeed in many cases it appeared strategic management was viewed as a one-off operational exercise merely to satisfy a legal and regulatory requirement rather than an essential business capability to ensure viability and sustainability.”

The report said it was “of major concern” that the bank consistently found underwriting and credit risk management standards were “so poor”, especially given recent loan losses.

The majority of credit unions visited had been required to implement a range of actions designed to remediate risk and to substantially improve their lending and credit risk management standards and practices.