Central liquidity fund for credit unions

THE Registrar of Credit Unions, James O’Brien, has reiterated the need for a statutory central liquidity fund for the credit union sector; adding that the existence of such a mechanism “has never been more important”.

Addressing the Joint Oireachtas Committee on Economic Regulatory Affairs yesterday, Mr O’Brien said the credit union movement in Ireland was facing “challenging times”, but it can have a bright future.

“There is no reason why the sector cannot come through in good shape, however this will depend on how boards and managers respond to the challenges. The future shape of the credit union sector depends on that response,” he said.

With regard to a central liquidity fund – something which has been called for before – Mr O’Brien said: “In a period when credit unions are experiencing increased stress due to economic conditions, the need for a statutory central liquidity fund for the sector has never been more important. This fund could be accessed by credit unions experiencing unusual liquidity demand at short notice. We would wish to see the creation of a statutory central liquidity mechanism for the credit union sector established as soon as possible.”

Mr O’Brien also updated on the Financial Regulator’s plans for a strategic review of the sector. He said the first phase of the study will be completed by December, with the second phase due to run until the end of next March.

The first phase will assess the current risk profile of the sector, while the final phase will address the strategic direction of the movement. He said it has become “increasingly clear” that changes are required in how credit unions operate, to enable the sector to progress to its next stage of development.

“I believe this is a valuable opportunity to design a sustainable credit union business model and regulatory structure,” he added.