Credit unions 'must protect themselves'

Credit unions should put in place a robust governance framework and boards should avoid relinquishing too much control to managers, a conference was told today.

Registrar of Credit Unions James O’Brien told the Credit Union Managers Association that institutions would have to protect themselves if they wanted to survive in the current times.

Managers played a key role in the operations of credit unions, he said, but the boards will continue to be held responsible for the running of the credit unions.

"In the current economic environment, it is ever more likely that boards will increasingly rely on the integrity, skills, knowledge and expertise of their management teams to help steer their credit unions through these turbulent times for all financial institutions," he said.

Mr O'Brien said proper systems of accountability, risk management and control would be needed if credit unions were to meet the demands of its members, who are becoming more sophisticated.

Many problems in credit unions can be attributed to poor governance, he said. Basic principles should be implanted including such as clear structures and processes, ensuring board, management and staff are equipped with the competencies to run and manage the business, and enabling the strategy of the organisation to be implemented in a planned, safe and coherent manner.

"Too often, however, issues in problem case credit unions have been exacerbated by boards relinquishing control to a manager. This is not acceptable to us. We do and will continue to hold boards responsible for the running of their credit unions. However, neither is it acceptable that managers are not held accountable," he said.

Mr O'Brien also called for the role of managers to be recognised in legislation.

"In this respect we will also be seeking to put statutory fitness and probity arrangements for credit union managers in place as soon as possible. Managers are the professionals in credit unions and we would expect that they are accountable and appropriately qualified in terms of education, experience and competency to manage the complexity of the business they are running," he said.