Credit union merger warning

Consolidation within the credit union movement may prove more difficult than merger cases seen to date, the Central Bank has warned.

Addressing the annual conference of the Credit Union Restructuring Board, at the weekend, the registrar of credit unions Anne-Marie McKiernan said that the pick-up in the pace of voluntary restructuring needs to continue, and urged all credit unions which feel restructuring may be required to address the board.

“As the sector’s consolidation gathers pace, not surprisingly the more straightforward merger opportunities may soon be complete and future cases will face additional difficulties,” said Ms McKiernan.

“For example, there may be a shortage of willing and strong transferees in some areas, while some credit unions may look beyond traditional boundaries to find a suitable partner in order to secure longer-term viability.”

In the past eight years, the number of registered active credit unions has fallen from 428 to 376, with about half of that drop-off taking place since the recommendation report issued after the formation of the Commission on Credit Unions in 2012.

However, with loans to members down by around 10% in the past 15 months, loan interest income falling by half in the past five years, and loan arrears at historic highs, with one third of credit unions having arrears greater than 20% of their gross loans, Ms McKiernan reported that while much has been achieved by the board, more work is necessary.

“The need to continue and keep up pace in 2015 is also clear. This is particularly in view of the continuing weakness in many of the key financial measures of the health for the sector,” she said.

“The important objective is to ensure that restructuring achieves better outcomes for current and prospective members, enhances the financial soundness of credit unions and acts as an enabler for future growth and development, setting the sector up for a viable and successful future.

“For each credit union, the questions to consider include: Are we providing the services that best suit our members now and in the near term; how is the credit union positioned to provide the best levels of services to current members and to attract new business in the future; and is there a strategic opportunity to place our credit union on a path of growth and development?”