Report recommends restructuring of Credit Union sector

Report recommends restructuring of Credit Union sector

A final report by the Commission on Credit Unions has recommended that the sector be restructured on a voluntary basis through amalgamations and transfers.

Credit Unions approved by a Restructuring Board will be given funding to ensure they have enough money, and to upgrade systems, the report recommends.

A stronger, tiered regulatory framework will be introduced on a phased basis - with less onerous requirements on smaller credit unions.

New legislation to enact the recommendations will be published by the end of June.

There are currently over 400 credit unions in Ireland, which all operate on an independent basis, with a not-for-profit mandate.

The Minister for Finance has welcomed the report, as have the Irish League of Credit Unions (ILCU) and the Central Bank.

"The report makes clear and wide-ranging recommendations to address the challenges currently facing the credit union sector and to help secure its long term sustainability," a statement from the Central Bank said.

"We support the view that a planned restructuring of the sector is important to ensure that both individual credit unions and the sector overall meet members’ needs."

The Commission on Credit Unions was established by the Government to review the future of the credit union movement and make recommendations in relation to the most effective regulatory structure.

Chaired by Professor Donal McKillop of Queens University, Belfast, the Commission produced an interim report in September last year.

"There are 404 Credit Unions in Ireland and of that 404, only 51… have a reserve ratio of less than the 10% regulatory requirement," Prof. McKillop said.

"And of that number, only 25 of them would have a reserve ratio of less than 7.5%.

"Those Credit Unions might be view as significantly undercapitalised."

ILCU CEO Kieron Brennan said members of smaller unions will particularly benefit from the restructuring.

"You could, for example, be a member of a small Credit Union with limited opening hours and limited services," Mr Brennan said.

"Following the restructuring process, if your Credit Union decides to become involved, you could end up in a situation where you have a five-day week (in terms of) opening hours, and also a broad range of services available to you."

Finance Minister Michael Noonan said he will now study the recommendations and will introduce new legislation by the end of the June.

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