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Wednesday 27 August 2014

Ninety credit unions considering mergers

Charlie Weston Personal Finance Editor

Published 28/03/2014 | 02:30

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The credit union network has been rocked by an Irish Independent investigation into the use of so-called tracing agents.

CREDIT unions have been warned that they need to merge to form strong units in order to counter a drop in their income.

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Around 90 credit unions are considering merging with one another, ReBo the state body that was set up to run the merger process, said.

ReBo (Credit Union Restructuring Board) issued a strategy document as members of both Swords Credit Union and the one in Coolock-Artane backed a multi-million euro tie-up. Already this year, 16 credit unions have come together to form six entities. There are now 390 credit unions in the State, with each one owned and run separately.

Head of ReBo, Donal Coghlan, said merging offered the best chance for the local lenders to recover from the squeeze on their earnings.

Mr Coghlan said the loan books of credit unions were not growing. Half of the local lenders were now earning so little from loans that their loan interest income was now lower than the cost of operating.

STRENGTH

Lending to members is the main activity of credit unions, which have 2.9 million members. ReBo was set up by the Government to manage an expected wave of mergers across the sector, and has a fund of €250m to facilitate the tie-ups. The mergers are not expected to lead to the closure of any credit union offices, any job losses or the loss of the one-member-one-vote system, experts said.

But it will mean that existing credit unions end up as larger units, which should make them stronger.

Mr Coghlan warned that the new personal insolvency legislation would mean losses for credit unions. In addition, some were finding it hard to recruit volunteers, while investments were not growing because of low interest rates.

"The challenges continue to be a feature of the current landscape. Achieving scale is a significant factor in addressing the current financial weakness in many credit unions – ReBo are there to facilitate this."

He added that 90 credit unions were in talks with ReBo about mergers. If all of these mergers go ahead, it could reduce the number of individual credit unions by around 45.

Meanwhile, members of Swords and District Credit Union and members of Coolock-Artane Credit Unions in Dublin overwhelmingly backed merger plans this week.

Chairman of Coolock-Artane Credit Union, John Matthews said combining the two credit unions would secure the finances of both and maintain their ability to pay a strong dividend, to keep loan interest as low as possible and to deliver a range of new services.

"While there will be improved efficiencies in back-office services, the branches, identities, staff and services will all remain unchanged. The jobs across the branch network will be secure and as the combined entity grows, more jobs will be created," he said.

The new body is to be renamed Member First Credit Union. The merger is the biggest so far, and sees the creation of a group with assets of €148m and 44,000 members.

Irish Independent

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