Special unit set up as Central Bank bids to merge credit unions
Published 17/09/2011 | 05:00
THE Central Bank has set up a special unit to manage the mergers of credit unions. The move is the clearest sign yet that regulators want to radically reduce the number of credit unions from 409 to as few as 100.
Registrar James O'Brien said recently that mergers would be necessary as an increasing number of credit unions were set to get into financial difficulty this year, mainly due to being badly run and because of arrears on member loans.
A consultant's report found there were too many credit unions functioning at a high-risk level, Mr O'Brien said.
"Four hundred autonomous entities competing in a relatively small market is no longer sustainable," he said.
One of the ways of dealing with this would be to get weak credit unions to merge with stronger ones. This would not mean that an area would lose its credit union office. Instead, it would operate as a branch of a larger credit union.
Stronger credit unions, which would have others merged into them, are being identified and labelled "consolidator" credit unions.
New legislation, expected to be passed later this autumn, will give the Central Bank the power to direct credit unions to merge.
A spokesman for the Central Bank said the Credit Institutions Resolution Bill 2011 would confer new powers on the bank. It admitted that it had recently set up a Special Resolutions Unit within the Credit Institutions Supervision Directorate to manage the mergers.
Revelations in this newspaper earlier this week that almost 300 credit unions have had lending restrictions imposed on them by the Central Bank is seen as a precursor to beefing up weaker credit unions ahead of a spate of mergers.
Meanwhile, a government-appointed commission is set to recommend credit unions adopt a common information technology system, which would allow them compete with banks by offering current accounts.
People would be able to have their wages paid into their credit unions.
At present there are between five and six different IT systems being used.
Members could get access to their money online or through credit union offices anywhere and would also be issued with an ATM card.
The commission, which is headed up by Professor Donal McKillop of Queen's College, Belfast, is expected to produce an interim report by the end of this month.