Credit union sector warning

The proposed legislation aimed at overhauling Ireland’s credit union sector threatens to “drive up” the operating costs of individual unions, the movement’s main umbrella body warned yesterday.

Addressing the joint Oireachtas finance committee, Kieron Brennan, chief executive of the Irish League of Credit Unions (ILCU), said changes were needed to draft proposals to the Credit Union Bill 2012.

“Operating in difficult economic circumstances is no easy feat, and now the draft proposals in the draft general scheme threaten to drive up the operation costs of credit unions even further. Many credit unions are particularly concerned about the prospective costs facing members arising from the restructuring board, the stabilisation fund and the resolution fund.”

Three months ago, Michael Noonan, the finance minister, published the general scheme of the Credit Union Bill, the first step towards industry-changing legislation. The draft general scheme — which was up for discussion yesterday — proposed setting up a restructuring fund to provide funding for credit unions in need of aid and threatened heavy fines and/or prison sentences to credit union chiefs failing to adhere to the new legislation.

One of the major criticisms put forward by the ILCU yesterday was what it referred to as the proposed “excessive” regulation of the sector and the resulting “threat to volunteerism”.

The ILCU said it agreed with a differentiated approach with regard to the regulation of individual credit unions, saying it was not looking for a “one size fits all” model. However, it disagreed with the idea of regulating unions based on their asset size and favoured the British regulatory model of a tiered system based on risk and complexity.

“While it is felt, by many credit unions, that some restructuring of credit unions is desirable, members are increasingly concerned at the level of regulatory imposition,” said Mr Brennan.

“Regulation should be proportionate to the scale of each credit union, through a tiered structure that recognises the different levels of operation and risk involved.”

He said proposals aimed at limiting terms of office for board members and restricting who could serve on union boards would go against the movement’s volunteer principle.