Credit union may face ‘shocks’

CREDIT unions have been warned that they may still face shocks in some investment portfolios while also told that governance of their boards will be scrutinised.

Deputy registrar of credit unions, James O’Brien, said that to a certain extent much of the investment losses at credit unions have already materialised and been recognised in the financial statements but added a “word of caution” that there may still be shocks, given the range and type of investment products bought by credit unions over many years.

In a hard-hitting speech to the Credit Union Managers Association, he urged credit unions to continue to make appropriate provisions for bad and doubtful debts.

“Prudent and honest accounting must be maintained and we will not accept any fudging of the position, for that is in nobody’s interest,” he said.

Mr O’Brien said the movement is working closely with credit unions to ensure that adequate liquidity ratios are maintained across the sector.

He also said the movement is experiencing an “extremely challenging economic and financial period” and credit unions must be pro-active in adapting their business.

“Boards and management will be severely tested as credit unions make their way through these turbulent times.”

Poor governance was also addressed, with Mr O’Brien saying that too often, the same credit unions appear on the radar.

The movement is establishing a statutory governance framework which will apply to credit unions and would include fit and proper competency based requirements for boards and managers.