Global financial crisis - Credit union reform is an urgent need

In the midst of the global financial crisis, nobody should be surprised that credit unions are also coming under pressure. They have accumulated losses of at least €700 million as a result of bad loans and underperforming investments.

Credit unions performed an invaluable service as the primary source of unsecured borrowing for Irish households during the last recession, but they may not be able to perform the same role in the current recession. Some may be unable to pay any dividends for 2008, or even provide a decent return on customers’ savings.

During the initial stage of the financial crisis last month, the Irish League of Credit Unions, which represents the interests of 521 credit unions, proclaimed that credit unions were safer than banks because they were not exposed to the subprime crisis. But the financial crisis is so far-reaching that credit unions are to some extent more exposed than banks.