Credit unions told only a minority complying with new regulations

Only a minority of credit unions are in compliance with the Central Bank’s new regulations for the sector, according to the registrar of credit unions, Sharon Donnery.

“Our Prism supervisory engagement has illustrated that while some of you are already meeting most of the standards proposed in the new framework, those credit unions are currently in the minority,” she told the Credit Union Managers’ Association conference in Athlone.

“It is also evident to us that these credit unions have clear organisational leadership, tighter risk management, and a better performing business model than their peers in the sector.”

The Central Bank’s Prism is its probability risk and impact system, which is designed to shore up standards in the sector.

Credit unions have borne heavy losses since the economic crash.

Ms Donnery said credit unions have to embrace more professional standards, such as risk managers, compliance officers, an internal audit function, and a board oversight committee.

“It is of concern that in a number of the credit unions we have visited as part of supervisory engagement, we have found a lack of strategic planning added to poor risk management frameworks and practices,” she said.

“Boards and management alike need to look on the strategic planning process and development of their risk management systems as an essential element of their business rather than a simple tick-box exercise to fulfil a regulatory requirement.

“It is paramount that boards become more strategically focused and less involved in operational day-to-day matters and decision making.”

Combined with changes to the way credit unions will be run in the future, there are also changes to the regulatory approach.

“The new act is designed to support the development of a strengthened regulatory framework. It provides for the development of a holistic regulatory framework for the credit union sector that incorporates prudential and governance requirements, addresses gaps in the existing regulatory framework, and sets out clearly the requirements for credit unions, their boards and management,” Ms Donnery said.

“The first of August saw the introduction of the fitness and probity regime and the commencement of a number of sections of the new act, in particular in relation to administrative sanctions and measures allowing credit unions the right to appeal certain decisions of the Central Bank to the Irish Financial Services Appeals Tribunal.”