Call for tougher regulation of credit unions

AT least one credit union has lost more than €10 million and others have lost millions because of investments that went wrong, the Seanad has been told.

Senator Joe O’Toole said investment losses, bad debt, liquidity problems and falling deposits could create a perfect storm that would wipe out a number of credit unions.

“A third of credit unions, many of them small in size, were losing between e100,000 and e1.2m annually,” he said.

“Many of them are not run properly and will not be run properly until we have put in place [new] measures.”

At least one credit union that he was aware of had lost more than e10m on various bonds, with others “losing millions” in the same investments.

Mr O’Toole was speaking after an Irish Examiner report this week revealed concerns held by the Financial Regulator about the financial stability of Mitchelstown Credit Union.

The senator has been calling for additional powers to be given to the regulator of credit unions for several years.

Credit unions are regulated by the Registrar of Credit Unions under the umbrella of the Financial Regulator’s office. But Mr O’Toole said the regulator’s guidelines were being roundly ignored by some credit unions and that tougher legislation and powers were necessary.

“The only way to deal with it is for us to give the power to the regulator to insist that what are now guidelines would be rules that the credit unions would have to implement,” he said.

But junior minister Trevor Sargent, responding on behalf of the Government, said it was wrong to suggest the regulator was toothless.

“The registrar has extensive powers of inspection and investigation of credit unions as well as broad supervisory powers, for example, to appoint, suspend or remove a person as a director of a credit union, or to remove auditors… It cannot be said the regulatory system relies on guidance only to credit unions,” he said.

However, the minister added that the Government remained “open to considering” legislative reform “on the basis that proposals are agreed in consultation with the major stakeholders”.

Mr Sargent also stressed that, following the government guarantee scheme announced last September, all credit union savers could be reassured that their savings and shares to a maximum of e100,000 would be safe.