Development plan calls for credit unions in difficulty to merge

CREDIT unions in difficulty should merge with larger operations according to a plan proposed for the movement.

A group of credit union members, the Credit Union Development Association (CUDA), published a white paper on the future of the movement yesterday.

The group proposes a “central liquidity facility” where credit unions would deposit a portion of surplus funds. These deposits would remain on their balance sheet as an asset and, according to CUDA, would attract a competitive return.

The facility would be self-funded with “no added financial strain on individual credit unions” it states.

It said credit unions would have full access to funding in event of liquidity emergency, reducing the potential to call upon the state guarantee. The group also proposes that when a credit union has a problem it should consider a merger with a stronger credit union.

Chief executive of CUDA, Kevin Johnson, said: “Credit unions are not immune from the global and national economic winds of recession. However, on aggregate the credit union movement is reasonably strong in terms of both their reserve and liquidity position, as the Minister for Finance and the Registrar of Credit Unions have both stated.

“Against the current backdrop of unprecedented pace of economic decline and the near collapse of the main Irish banks, the credit union sector can step up to the plate for ordinary people by redefining its prudential configuration to ensure that it not only maintains its relatively healthy and stable financial position, but that it can also meet the saving and borrowing needs of a growing membership who are increasingly turning to a brand they can trust.”

An “effective and enabling legislative and regulatory system” is needed to ensure the healthy position of credit unions into the future.

Mr Johnson said credit unions “deserve and need modernised legislation” to underpin growth in the sector “with effective and enabling supervision by the Financial Regulator completely replacing all forms of industry self-regulation.

“Such a system needs to take into account the prudential perspective of regulation but also foster enabling relationships with the sector, ensuring that stakeholders understand their respective roles and work together to cultivate and role model a genuinely ethical and trustworthy financial services industry in Ireland, that provides products and services that are both fit for purpose and which Credit Union members value.”