The Central Bank is planning a review of the country’s credit unions across a range of areas including an assessment of the quality of their loan books and value of investments.
The bank’s Registry of Credit Unions (RCU) is looking to supplement its internal supervisory capabilities and has tendered for a third party to contribute to its ongoing supervision of the sector.
It’s the first time since 2009 that such a framework to extend the Central Bank’s range of expertise in this sector has been undertaken.
The RCU’s inspections will focus on four facets of the country’s credit unions: lending; investments; fixed assets; and governance.
Inspections will delve into the loan provisioning requirements of credit unions and the quality of their loan books, with specific focus on the size and purpose of loans and arrears.
The reviewer will also be expected to assess the recoverability of the of loans on their books.
The Irish League of Credit Unions said progress has been made across the some 500 credit unions, especially in relation to arrears.
“Our internal data suggests a positive trajectory for credit union figures, in particular, there has been a great deal of success in dealing with the arrears. In addition, more and more credit unions are returning to surplus and paying a dividend,” a spokesperson said.
Latest figures show that average sector arrears at the end of September 2014 were about 17% while almost one in 10 credit unions had arrears exceeding 30% of their loan book.
Separately, Credit Union Registrar Anne Marie McKiernan yesterday expressed concerns over the viability of some credit unions and criticised the slow pace of reform undertaken by a number of boards.
Addressing the Credit Union Managers’ Association’s (CUMA) spring conference, Ms McKiernan said: “A clear challenge is the reluctance of some boards and management to proactively address viability issues and develop new sustainable business models to deal with the current challenges. In this respect, we remain concerned about the quality of strategic thinking and planning in many credit unions”.
Loans to credit union members have decreased by almost 10% to €4bn since September 2013 while the average loan-to-asset ratio has continued to decline and is now at 30% with approximately 200 credit unions below this ratio.
While Ms McKiernan welcomed a decrease in arrears and a slight increase in lending the overall picture is one of continuing business and financial pressure, she said.
An ILCU spokesperson said, however, that credit unions have fared better than any other financial institution during the recession and added that the majority are now meeting the Central Bank’s regulatory reserve requirements.
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