Concerns exist over some credit unions, registrar admits

SOME concerns exist regarding a number of credit unions, the registrar for the sector Brendan Logue, said yesterday.

In an interview with the Irish Examiner following the publication of the 2008 report from the Financial Regulator, Mr Logue said “where problems exist they exist at the edges of the movement” and “fewer than 10” of the country’s 400-plus credit unions were giving any cause for concern.

In a few cases “specialist inspectors” have been appointed “where governance issues have arisen”.

In others, the level of liquidity “we regard as normal” may be too low and in some instances reserves may be below the norm, he said. “Overall the situation is fine,” he insisted.

In general, as registrar he has moved to bring the credit unions back to their traditional type of lending and has moved it away from lending for property and businesses purposes.

It has also intervened where the movement has extended lending terms beyond the norm, bringing them back in line with traditional practices.

“Overall, we are protecting the model that has been so successful for many years,” he said.

Jim Farrell, chairman of the Financial Regulator commenting in the annual report said there was a general consensus the credit union legislation needed to be modernised.

In that context, the regulator was working with the Department of Finance on this project.

Mr Logue said that the movement was adequately funded, but warned that the deteriorating economic climate would result in higher bad debts in 2009 with fewer credit unions likely to pay dividends.

At the end of December 2008 lending to members totalled €7.3 billion.

Looking ahead he said “significant changes” will be needed in the areas of lending and investment practices to ensure risks are minimised.

In the current climate arrears will be a problem for many credit unions and the movement is insisting there should be “no fudging on that issue”, he said.

Quarterly reports are furnished to the registrar’s office to ensure proper allowances are being made to cope with that contingency, he said.

Liquidity will be of “prime importance” and each credit union will have to ensure it has enough funds to meet the more challenging environment.

He also welcomed the proposed review of the credit union sector by Finance Minister Brian Lenihan adding that “urgent measures” relating to liquidity support must be put in place in the interest of protecting members of credit unions.