Merger mania ‘may be catastrophe for credit unions’
The bank’s registrar of credit unions, James O’Brien, yesterday acknowledged that mergers will take place but cautioned that a piecemeal approach to changing the structure of the sector is not ideal.
“The prospect of unplanned merger mania where credit unions jockey for position within the sector is also a concern for us,” Mr O’Brien told the Credit Union Managers’ Association spring conference, in Athlone, Co Westmeath. “Ill-thought out voluntary mergers happening in a chaotic fashion with little professional oversight of the restructuring process could have a catastrophic impact on the sector where the outcome simply creates bigger weak entities incapable of developing.”
The registrar said he believes that if the credit union movement is to develop prudently and work towards its potential, it is vital that a blueprint is developed for the sector that will direct structural change in a planned and coherent fashion.
“Any such plan must be sufficiently detailed to ensure certainty as to what is to be achieved in terms of the final shape of the sector — post restructure. It must also have clear time-bound deliverables. The restructuring process would require strong and intensive oversight and support. The new structure will also have to facilitate the pre-emptive resolution of weak and failed entities in a timely fashion.”
Mr O’Brien said credit unions should not be waiting for the Central Bank to intercede.
“We expect to see directors and managers of weakening credit unions taking the initiative at an early stage and seeking solutions that protect the interest of their members into the future.”
Mr O’Brien also issued a warning to the leadership of the credit union movement.
“Representative bodies also have an increasingly important role in seeking to maintain a sustainable credit union sector. We expect prudent and responsible leadership from all bodies charged with representing the movement stakeholders.
“There is a responsibility on representative bodies to fully analyse and articulate the risks to individual credit unions and the sector overall, and especially the impact on the future of the movement, when there are calls for changes to, or easing of, regulatory standards.”
Mr O’Brien rebuffed concerns that the new fitness and probity regime, with minimum competency requirements for officers in credit unions, will drive volunteers out of the movement.
“On the contrary, we believe that the introduction of formal governance standards will help attract more volunteers into the sector,” he said.
