Credit unions may be forced into mergers by the State
THE Government is to bring in laws that would allow it to force credit unions to merge, according to the revised bailout deal between the State and IMF/EU.
All credit unions are independent entities and the State currently has no powers to force them to come together.
Half of the 414 credit unions in the Republic have assets of less than €20m. A large number are under pressure due from loan losses and poorly performing investments.
Now the Government has told the IMF/EU a review of the sector that is being carried out by consultants will be completed by the end of the month.
It will look at the viability and solvency of "the undercapitalised institutions", according to the updated IMF/EU agreement document, which was released yesterday says.
The State is to "obtain the necessary powers to promote a higher degree of consolidation in the sector through mergers, where appropriate, with government financial support, if warranted."
Central Bank official Jonathan McMahon said last month that major consolidation within the sector would be necessary in order to ensure that it survives.
It is thought that government officials and regulators would favour a system whereby instead of having more than 400 credit unions, there would be between 100 and 150.
This 'hub and spoke' approach would not see credit union offices close, but instead a number of credit unions in each county would come together and operate centrally.
Instead of having 10 in a county, there would be one head office, with the other nine operating as branch offices.