Business Irish

Sunday 26 May 2019

Not all credit unions will survive, says regulator

Mergers will provide way forward for sector as loan arrears continue to rise

Charlie Weston Personal Finance Editor

A "significant restructuring" of credit unions may be necessary because of rising loan arrears, the regulator for the sector said for the first time.

Registrar James O'Brien said some credit unions were in financial trouble because of rising bad debts or bad decision making.

There are some 414 credit unions in the State with each one run as a separate, independent, entity with its own board of directors.

Mr O'Brien warned that a number of credit unions would go under in the current downturn. "The current credit union operational model is coming under increasing stress.

"It must be recognised that not all credit unions will make it through this difficult financial and economic environment in their current structure. We must prepare for this," he told a conference at the weekend.

He said credit unions that did not have sufficient reserves would suffer.

"Should these trends continue, it is not implausible that a significant restructuring programme for the sector may be required," he told credit union supervisors.

Mr O'Brien, whose office is part of the Central Bank, did not spell out how many credit unions the State needs.

He admitted he has no specific powers at the moment to force credit unions to merge with each other, but said his office will use its powers of persuasion to encourage tie-ups.

Some experts in the sector believe there is an oversupply of 100 credit unions.

If mergers were to happen here at the same rate as in the US there would be one-third fewer credit unions.


Mr O'Brien said credit unions offices would not need to close, instead they could become branches of larger entities, particularly in rural areas.

He warned directors that where a credit union was no longer viable on a standalone basis, it should be proactive in exploring merger opportunities.

"This will call for strong and determined leadership and, indeed, difficult and unpopular decisions may have to be made," he said.

The alternative of a failure of one or more credit unions could lead to a huge loss of confidence in the sector, he added.

Irish Independent

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