Note to Central Bank: credit unions making huge progress
The charge sheet laid out against the credit unions by the regulator of the sector was long and scary. In a speech last week Registrar Anne Marie McKiernan criticised poor quality lending.
She accused credit unions of not checking if members could meet repayments, and said they were failing to properly deal with arrears cases.
Ms McKiernan, whose office is part of the Central Bank regulatory set-up, said the sector was under financial strain. Just €3 out of every €10 in assets of the credit unions was loaned out, and there are "serious" governance issues at some credit unions.
Ms McKiernan, who was appointed as registrar last summer, said that half of all credit unions have had lending restrictions imposed on them by the Central Bank.
Speaking at the annual conference of the Credit Union Development Association (CUDA), a representative body for some of the larger credit unions, she said: "Overall, it is a picture of continuing business and financial pressure and it is clear that major, rather than minor, changes in approach are needed to stem this decline."
She said one option for credit unions was to merge with others.
There was some praise for the sector, but reading the speech, any level-headed person would get the impression that the voluntary-run credit union sector was in tatters.
Except that is not necessarily the case.
Yes, there have been a small number of financially-stretched credit unions that have been shut down or forced into mergers.
And there is a small number of others that are mismanaged, and still reeling from the economic tsunami that hit this country in 2008.
But, in the main, the sector has got its act together.
Arrears levels are down sharply, most credit unions are now paying a dividend, and 90pc of credit unions meet the 10pc reserves ratio required by the Central Bank.
That is a pretty healthy situation, under any measure.
Credit union leaders will tell you that it is very hard to know what exactly the Central Bank wants, such are the plethora of rules and regulations. It is never very clear when exactly a credit union is compliant.
It was put to the Central Bank that the speech was alarmist, not reflective of the progress made, and an attempt to push more of the lenders into merging, to make the movement easier to regulate.
"Any actions taken are always done in the best interests of protecting members and their funds," was the gist of the reply.
Credit unions have not needed massive bailouts like the banks. They provide a community service and should not be regulated like banks.
Treating them as they are treated in Canada, where they are helped to grow, would be more appropriate rather than attempting to regulate them so aggressively.
Sunday Indo Business