Credit Union fund may not be big enough
He said the failure of a just a single credit union would have “reputational consequences” for the movement as a whole.
The Financial Regulator’s Registrar of Credit Unions Brendan Logue also accused some supervisors of misleading members by not identifying serious problems.
In a hard-hitting analysis to supervisors Mr Logue said that while most credit unions could apply to the league for support if they were in difficulty, it is unclear as to whether the resources in its €110 million savings protection scheme (SPS) would be adequate to deal with the collapse of a large credit union and especially if more than one got into difficulty.
He said they are seeking to have this matter addressed. Mr Logue said he has been “puzzled” for some time as to why the reports of the supervisory committee of some credit unions which are made to members, and which are contained in the annual report, often do not identify serious problems in the operation of the credit union which should be obvious to them.
“In looking into this matter I have had a study carried out of the reports to the AGM of the supervisory committees of many credit unions where we know there are problems of varying degrees of severity. The findings of the study indicate that there is something amiss with the way supervisory committees are reporting,” he said.
He said that in many or even most instances, the supervisors report is “quite inadequate”.
“In some instances the reports were quite misleading,” he said.
Mr Logue pointed to one case where the report said that the affairs of the credit union are being conducted in a very satisfactory manner “when this was obviously not true in that case”.
He said “very many” supervisors are failing in their obligations to their members, who he said have a right to be made aware of their credit union’s affairs.
Mr Logue said supervisors should be aware that honest accounting is the bedrock of financial stability.
“No matter how unpleasant any financial issue for a credit union is, it must be addressed in the accounts with prudence, courage and honesty,” he said.
As members look forward to receiving their annual dividends over the coming months the Regulator warned that “great care and prudence must now be exercised in deciding on the level of dividend and interest rebate to be paid to members”.
“Certain important prerequisites must be addressed and fulfilled before a dividend is decided,” he said.
A spokeswoman for the Irish League of Credit Unions said the league has the ability to increase the funds of the SPS if it feels the needs arises. She would not comment on remarks made by Mr Logue on the behaviour of supervisors.
