More credit unions to close as branches consider mergers
THE CLOSURE of further credit union branches looks increasingly likely after senior industry experts said all of Ireland's 400 credit unions should consider the possibility of restructuring.
Restructuring was the main topic at a conference on transforming the sector, hosted by credit union insurance company CUNA Mutual, which insures the assets of 40 of the country's biggest credit unions.
Mergers rather than outright closures were discussed, but a merger of two credit unions usually means that the premises of one is shut down. Though very few have occurred so far, the experts said further mergers are likely in the second half of this year. Mergers expert Tim Scanlon said credit unions need to be dispassionate and "take a long hard look at themselves" to assess their financial viability.
The lawyer said that merging credit union branches released more money to invest in new products and technologies as well as a bigger customer base to tap into.
"There's always a bias towards hanging in there, hoping things will get better, but we know from credit unions in other countries that this just does not work. Credit unions need to be wary of being overly optimistic," said Alan Ahearne, a former adviser to the late Brian Lenihan.
The Government has already made it clear that restructuring is necessary; at the beginning of this year it created a temporary restructuring board to manage the sector until 2015.
If credit unions do not keep 10pc of capital in reserve they are required to look for financial support or seek to restructure.
Fifty-one credit unions had less than the required 10pc on reserve as of 2011, while 25 were seriously undercapitalised, with less than 7.5pc in reserves.
Given that credit unions sell themselves as being part of local communities, panelists were asked whether closing physical branches would have an even more damaging effect than the closure of bank branches would have on AIB or Bank of Ireland.
It was pointed out some credit unions thrived without an emphasis on physical branches, pointing to those based around industry sectors, like credit unions for teachers and gardai which are successfully run in a more 'virtual' manner.