THE COUNTRY’S credit unions may need to be significantly restructured if arrears continue to rise and lending opportunities remain subdued, James O’Brien, the recently-appointed registrar of credit unions, has warned.

Some credit unions lent aggressively during the credit binge and are now struggling during the downturn.

“Not all credit unions will make it through this difficult financial and economic environment in their current structure,” Mr O’Brien told the National Supervisors Forum yesterday.

“The subject of ‘restructuring’ within the credit union sector must now be put firmly on the table for open and considered discussion.”

Mr O’Brien said his office would move swiftly to prevent a failure of a credit union.

“It is important ... that we are able to take appropriate pre-emptive action to restructure credit unions where we deem this necessary in order to protect members’ funds and the maintenance of the financial stability and well-being of credit unions generally,” he said.

The group intends to put forward proposals early next year.

“A failure of one or more credit unions could lead to a significant loss of confidence across the sector. This must be avoided.”

Mr O’Brien said the regulator would work at identifying weak businesses, but he also called on credit unions to be proactive and consider mergers to pre-empt financial collapse.

He said that even greater reform may be needed than first proposed in a recent consultation paper.

The State’s credit unions hold savings of €11.9 billion and have 2.9 million members, which equates to nearly two-thirds of the country’s population.

Financial regulator Matthew Elderfield warned last month that credit unions were a source of concern.

He said that credit unions were underprovisioned on their loans by 40 per cent on average.

– (Reuters)