Regulation hampers credit unions’ customer offering

Excess regulation is hampering credit unions’ ability to provide basic services such as debit cards to their members despite an EU directive aimed at ensuring those services are available to citizens in every country.

The Credit Union Development Association is calling for a review of the Central Bank’s implementation of recommendations made by the Commission of Credit Unions.

Chief executive Kevin Johnson said regulation needs to ensure customers have access to basic financial services while limiting risks the provider can take on.

“Unfortunately, the pendulum has swung too far from light-touch regulation to zero-blame regulation, which is fundamentally bad for consumers,” he said.

Mr Johnson also criticised a report by the independent International Credit Union Regulators’ Network for failing to assess the quality of the implementation of those recommendations.

He said it was regrettable that the report did not identify the irony of, on the one hand, a European directive aiming to ensure basic banking services such as ATMs and payment cards be accessible to every citizen including the most vulnerable and financially excluded, while on the other hand regulatory obstacles are preventing credit unions from fulfilling this role.

“As well as the absence of a tiered regulatory system, perhaps the lack of a transparent set of rules contained in a prudential rule book is the biggest failing arising from the implementation of the commission’s recommendations,” Mr Johnson added.

While the International Credit Union Regulators’ Network invited submissions from stakeholders, the Credit Union Development Association said it “cannot see a single instance of stakeholder views being taken into consideration”.

Mr Johnson added, however, that he was pleased the international body had recommended considering a limited review of the implementation of the commission’s recommendations.

“We now call on the [finance] minister to initiate a meaningful review immediately, and in particular in advance of authorising any further restrictive measures being imposed on credit unions,” Mr Johnson said.