The appointment of independent consultants to carry out a review of the credit union sector in Ireland has been welcomed by the Irish League of Credit Unions.
Chief executive of the Irish League of Credit Unions, Kieron Brennan, said he sees the review as an opportunity to strengthen the credit union movement, and allow it to take a more influential position in Irish society.
Speaking on RTÉ radio earlier today, Mr Brennan admitted that there were increasing bad debts across the credit union movement. However, he sought to reassure customers that their savings are safe.
"On the whole I think we would expect the review to find that credit unions are safe, strong and secure. But, I have to say, the movement is a large and diverse one with 500 credit unions north and south, and we would expect that not all of those will necessarily be operating to the peak level of efficiency," he said.
Mr Brennan was unable to say exactly how many credit unions were in financial trouble but said that across the whole movement, up to 13 per cent of the €6.8 billion it had lent to customers were bad debts.
"Let's be clear there are increasing bad debts across the credit union movement. We wouldn't argue with that. We've seen those figures, they are a concern," he said.
Nonetheless, he said that in comparison to other financial institutions, credit unions were in good shape.
"Credit unions have performed extremely well throughout this financial crisis. In sharp contrast to the banks, they have not had to be bailed out, they have not had to have a Nama and no single cent of taxpayers money has gone into credit unions.
The Central Bank and Financial Regulator yesterday announced the appointment of Grant Thornton to conduct the new review, which was requested by Minister for Finance Brian Lenihan.
“In the current challenging economic environment it is important in the interest of members and the sector as a whole that there is a strong and healthy credit union sector,” the Central Bank said.
“The significance and scale of the sector means that the regulatory regime has to be adapted to ensure credit unions remain viable in a new financial environment.”
The bank said responsibility for maintaining sustainable credit unions and the future development of the sector rests with the current boards of directors, managers and representative leadership within the movement.
“Strong leadership will be required to steer credit unions through these uncertain times. If credit unions are to continue to achieve their mandate and develop as viable alternative financial services providers for their members then operational and regulatory change is necessary.”
The first phase of the review will include a detailed factual overview and expert assessment of the financial position and risk profile of the credit union sector as whole, the Central Bank said.
Grant Thornton will engage and consult directly with credit unions, carrying out surveys, interviews and on site reviews to collect information to make specific proposals.
The consultants will also examine external support mechanisms, governance and competency, the operating model and the regulatory and legislative framework for credit unions.
Registrar of Credit Unions James O'Brien urged credit unions to "engage positively" with the review.
"It offers a significant opportunity for all credit unions, large, medium and small, and the sector as a whole to develop a robust and sustainable business model. To support and encourage this outcome, our regulatory focus over the next few years will be based on the principle of 'strong credit unions in safe hands'."
