Overhaul of credit unions imminent

Finance Minister Michael Noonan is to set up an implementation group in the coming weeks to put in place recommendations for an overhaul of credit unions.

The group will include representatives similar to those who sat on the Commission on Credit Unions, which recently made the recommendations that will bring about the biggest transformation in the history of the Irish credit union movement.

Mr Noonan plans to publish the Credit Union Bill before the end of June, which will give effect to changes in regulation and governance outlined in the commission’s report.

Speaking at the AGM of the Irish League of Credit Unions (ILCU) in Killarney at the weekend, Mr Noonan said the Government regarded credit unions as essential to Irish society and wished to see early implementation of the report.

He also said that while credit unions were hit by the financial crisis, they had fared better than some household banking names.

However, challenges facing credit unions were “very real” and the energy of their volunteer members would need to be harnessed “to bring Irish credit unions towards the mature stage of development seen in movements internationally”.

Mr Noonan said changes would be introduced on a phased basis and would create an environment for credit unions to grow their business and improve services to their members.

“Restructuring presents an opportunity to stronger credit unions to develop a more sustainable business model,” he told 3,000 delegates. “It also provides a mechanism to deal with the financial stresses in credit unions in an orderly and constructive way. Without restructuring, there is a risk that problems will unwind over an extended period and in a way that erodes member and public confidence.”

At the end of last year, 51 of the Republic’s 404 credit unions were undercapitalised, with 25 considered seriously undercapitalised.

Mr Noonan said restructuring would not apply to all credit unions. Some would continue to operate successfully on a stand-alone basis, provided they had a viable business model and met regulatory requirements.

The process will be overseen by a Restructuring Board (ReBo) to be set up in the coming weeks, which will ensure the timetable for restructuring is delivered upon.

The Government is to put €500m into the process and this will be paid back by the credit union movement over a number of years.

ILCU chief executive Kieron Brennan said it will be a matter for each individual credit union to decide whether it wants to engage in the restructuring process.

He felt the process would result in stronger and better credit unions.

The process envisages that credit unions which are weak and at risk of insolvency will merge with stronger ones.