Central Bank: Credit unions will exist in a ‘different form’

FURTHER consolidation in the credit union sector is expected to take place as the Central Bank says the movement will exist in a “different form” in the future.

The Bank is planning to take “definitive actions” to place the credit union movement on a stable long-term footing.

The bank believes that a strengthened credit union sector, in a different form, can be made a reality.

It is expected that more credit unions will be merged but each will still have a presence in their community but on a smaller scale.

Director of credit institutions at the Central Bank Jonathan McMahon said there is an opportunity for a strong mutual sector, providing financial services to all sections of society, to emerge and replace that extinguished by the banking crisis.

“This will require leadership and imagination, but there are good international precedents for what can be achieved,” he said.

“The Central Bank is certainly of the firm belief that a strengthened credit union sector, albeit in a different form, can be made a reality, and we will engage constructively with those who share this objective.”

He said the Irish League of Credit Unions (ILCU) has played a central role in supporting credit unions facing financial difficulties.

“While ILCU support has been important to the maintenance of the sector’s stability, the Central Bank considers that somewhat more definitive actions will also be required if the sector is to be placed on a stable long-term footing,” he said.

The Central Bank met with credit unions and their representatives earlier this week to discuss the future direction of the sector.

Mr McMahon said: “Our starting position is that strong credit unions, operating close to the population they serve, should remain a central part of the Irish financial services landscape.”

Speaking in UCC, Mr McMahon said Ireland must address large credit losses in its financial system. The “strategy of booting the can down the road” is no longer an option,’’ he said.

He added that only when the banking sector is able to generate sustainable profits can it be considered stable once more. “The alternative is that the taxpayer remains the main source of capital for the banks. This would not be a good outcome.”

Mr McMahon said that in the future smaller banks would have fewer business lines and would operate mainly in the Republic.