Credit unions criticise ‘overzealous’ regulatory plans

Dail committee told that ‘one size, fits all’ governance won’t help sector grow

Central Bank proposals to exert stronger regulatory oversight on the credit union sector are "overzealous" and "take risk management to a point where it becomes risk prevention", the joint committee on finance, public expenditure and reform was told today.

Appearing before the committee to discuss the sector's plans to offer wider services to members and to discuss how credit unions were faring in the current climate, Kevin Johnson, chief executive of the Credit Union Development Association (CUDA) said new requirements around governance needed to be proportionate and urged against a "one size fits all' regulatory model.

“We don’t have an average credit union. They range in size and shape and cover a diversity of needs,” said Mr Johnson, who along with his colleagues has called for credit unions to be assessed using a tiered regulatory framework.

Mr Johnson said credit unions wanted to be able to provide genuine competition in areas such as mortgage lending but said this would be difficult to do in an environment in which they were all regulated using the same criteria.


Separately, Ed Farrell, chief executive of the Irish League of Credit Unions, said impending regulations, which are contained in the final sections of the 2012 Credit Union Act, and which are due to commence in January would place limits on the savings unions could take in and also limit the types of investments they could make.

“There is now a growing disconnect between the ethos of credit unions and that our our regulator, the Registry of Credit Unions,” he said.

“This is not about being for or against regulation. It is about better, more effective regulation and doing the right thing,” he added.

Mr Farrell said the sector was in good shape with the last two quarters seeing a rise in loans taken out by members. He also noted that the €250 million originally set aside for the restructuring of credit unions in the wake of the financial crash had been wide of the mark.

The Credit Union Restructuring Board (Rebo) last month said it now only expected to spend €20 million on the consolidation process by the time it winds up in March.

“Four years ago there were very big numbers being pushed about and we objected to those as we had done stress tests and so we thought those figures were way off,” he said, adding that the sector had addressed many of the problems it had faced without needing outside assistance.

Mr Farrell said credit unions had an exciting developmental agenda, which included the rolling out of electronic payment facilities and a plan to create a central fund to lend to small businesses. He also said the sector was involved in a pilot project with the Department of Social Protection for a new loan scheme that would prove to be a real alternative to moneylenders.

“Serving a broad social agenda is part of what credit unions were set up to do. At present, credit unions hold surplus funds of €8 billion in investments on behalf of members. We believe these surplus funds could be used more efficiently,” he said, citing assistance with social housing as an example.

According to Mr Farrell, the Irish League of Credit Unions currently has almost 3 million members, savings in excess of €11 billion and over €13 billion in total assets.

Charlie Taylor

Charlie Taylor

Charlie Taylor is a former Irish Times business journalist