Having run a consultation exercise on its proposals for new regulatory requirements for the credit union sector, the Central Bank has now published its feedback report and finalised the regulations it intends to implement.
The credit union movement argues that much of its input has effectively been ignored, though the Central Bank would clearly point to areas where it has amended its original position.
Credit unions have described the new regulations due to come into force in 2016 as "a retrograde step" . They would ensure "credit unions are restricted from competing effectively with other financial service providers into the future", they said in a rare joint statement from the Irish League of Credit Unions, the Credit Union Development Association and the Credit Union Managers' Association.
That is what lies at the heart of the debate. Credit unions are keen to provide more direct competition with banks and feel they are being made subject to restrictions that do not apply in the broad banking sector – especially in terms of limits on individual savings, loan size, loan duration and even where they can invest their surplus funds.
Supporters argue that the sector is already providing much of the personal lending available in what has been a very tight market. They note that, with some exceptions, credit unions have proven more stable than banks.
But they are not banks. They retain the amateur and voluntary ethos on which the movement was founded as a community-based provider of financial services to people who would not generally have had access to mainstream banking arrangements.
And that is the Central Bank’s dilemma. While some credit unions are very large and professionally run, others do not have sufficient size even to bear the regulator’s new reporting requirements. And yes, during the Celtic Tiger years, more than a few engaged in lending for development-type loans for which the sector was never designed.
If they want to compete more directly with the banks, credit unions need to be able to reassure customers and the regulator that they have the capacity to bear large-scale losses without recourse to the taxpayer – or their “small community saver” base. Only then can they reasonably expect the regulator to “level the playing field”.
And even with that, the sector should be careful what it wishes for. The reason so many people use credit unions is precisely because they are not banks. If they are to become indistinguishable from their mainstream rivals, they risk losing the very identity that has underpinned their success.
Either way, in the wake of the financial crisis – including the collapse of some high-profile credit unions – it can be little surprise that the regulator is erring on the side of caution.