The co-operative banks feel a disconnect with their regulator limits what they can do for customers, according to Brian McCrory
Credit unions are a membership-based co-operative movement. Our mission is to deliver on the social dividend which the Government says is at the core of its economic policy. In practice, that means 352 credit unions, with in excess of 3m members in every community in the country are prudently, compassionately, and accessibly making credit available to people who otherwise could not access it, or instead chose credit unions as their go-to community financial resource.
Families, small businesses, and people of modest means could not function without credit unions. We are an ambitious, developmental movement with big plans to enable us play a much greater role in delivering affordable finance for housing and small business through modern payments technology. We are deeply engaged with government through the Department of Social Protection in developing a new model for micro-finance that will enable credit unions deliver effectively in the future, as we once did in the past, on the pressing needs of those looking for small loans of less than €1,000. We are single-mindedly focused on what we can do if allowed to do so.
Strong regulation is an essential, not an accessory, in a modern financial environment. Regulation, however, has to be for a purpose. Clearly it must be prudential. Our members’ savings must be safe, and all loans must be appropriately assessed and sensible. These are incontrovertible bottom lines which we strongly advocate for. As a movement that is socially as well as economically orientated, we are fundamentally different from banks. We have members who are owners, not simply shareholders. The motivation behind our prudence with members’ savings is to make those savings available as appropriate loans for a social purpose.
There is now a growing disconnect between the ethos of credit unions and that of our regulator, the Registry of Credit Unions, which sits within the Central Bank. That disconnect is highlighted again in the recent publication by the Central Bank of the ‘Icurn Central Bank of Ireland Peer Review Report — Central bank Performance of its Regulatory Functions in Relation to Credit Unions’.
We note that the Icurn review team expressed concern at the sheer volume and complexity of the requirements with which credit union boards of directors and management must now comply. It is acutely frustrating therefore that the views expressed on behalf of credit unions in relation to the overly onerous regulatory approach of the Central Bank have not been taken into account or acknowledged.
Regulation cannot be allowed serve simply as a defensive mechanism to protect a regulatory institution scarred by its own recent failures. It must take those lessons on board and enable development while simultaneously being prudent. Strongly defending prudent practice, while supporting the developmental social agenda which credit unions were established to serve, are complementary not contradictory. Regrettably, those two essential, complementary objectives remain at the heart of a regulatory dysfunction which is hampering credit unions’ ability to deliver for members’ needs.
You might well think that we would say that, and indeed we do. A pressing example of regulation that is hampering credit unions is the Central Bank’s Consultation Paper 88 (CP88). Again, the evidence-based concerns of credit unions were ignored. The new regulations, which impose further restrictions on credit unions, are a retrograde step. In enforcing restrictive, one-size-fits-all regulations, the Central Bank is regulating to a degree that ensures appropriate lending is severely restricted, and the financial fundamentals underpinning credit unions are eroded. These regulations place unwarranted restrictions on credit unions, and send out a message that may cause reputational damage to our movement. Most importantly, those that will suffer most are ordinary members — current and future.
Notably, minister of state for trade promotion Seán Sherlock stated during a comprehensive Dáil debate on credit unions on June 24 that “the one-size-fits-all regulatory regime being proposed by the Central Bank in Consultation Paper 88, is an exercise in suppressive regulation and micro-management”. There is a wide political understanding, but as yet no action, in relation to the restrictive nature of credit union regulation.
The imposition of the regulations contained in CP88 is now dependent on the Minister for Finance signing a commencement order for the appropriate sections of the enabling legislation (being sections of the Credit Unions and Cooperation with Overseas Regulators Act, 2012).
What is at stake is the capacity of credit unions to contribute much more socially and economically to communities around the country. Vulnerable people are falling into the clutches of moneylenders and paying exorbitant interest rates. Families and small business are being prevented from accessing car loans, credit for a needed house renovation or seed capital.
An exciting developmental agenda that would be a game-changer in terms of choice and access to credit provision is at the starting blocks, waiting to go. Credit unions must be regulated and they need willing partners to share their vision.
Brian McCrory is the president of the Irish League of Credit Unions
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