The Central Bank does not propose to introduce a tiered regulatory framework at this time in view of the significant amount of changes facing the credit union sector.
In a lengthy paper following extensive consultation with credit unions, the bank said it plans to take a number of immediate steps. These include developing regulations for the sector under the regulation making powers in the 2012 Act.
“These regulations will contain a set of requirements that will apply to all credit unions, including regulations on lending, savings, investments, borrowings, liquidity and reserves, and will take account of the existing regulatory framework and feedback received on CP76.”
It committed to publishing a consultation paper, including a regulatory impact assessment. It will undertake a programme of nationwide information seminars to inform and engage with credit unions on the proposed new regulations and the next steps in developing the regulatory framework for credit unions.
The programme will also have an on-going engagement and consultation with credit unions and other sector stakeholders on the prudent development of the sector and the regulatory framework for credit unions.
Poor risk management and credit control practices were exposed across many credit unions following the collapse of the financial sector. The aim of the Central Bank review is to harmonise regulation for all credit unions and enhance transparency of the sector.
However, the feedback statement noted that comments about bad debt provisioning were mixed.
“The majority of respondents who comment on the proposed provisioning framework are of the view that there is a need for a provisioning framework to provide clarity and consistency in the manner in which credit unions calculate provisions, while others indicate that the existing provisioning framework is adequate.”
The Central Bank proposes to develop the provisioning framework for credit unions as separate workstream with guidance provided by the end of 2014.
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