Sunday 25 February 2018

Regulator signals wave of mergers to consolidate the sector

Charlie Weston, Personal Finance Editor

THE credit union regulator signalled yesterday that it will lead a wave of mergers across the sector in a move that could see a halving over time of the 400-plus credit unions in the State.

Registrar James O'Brien said mergers would be necessary as an increasing number of credit unions are 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 in a speech in Kilkenny. "Four hundred autonomous entities competing in a relatively small market is no longer sustainable," he said.

The review, carried out by consultants Grant Thornton, concluded that Ireland "has too many credit unions which are functioning at an inappropriately high-risk level".

One of the ways of dealing with this would be to get weak credit unions to merge with stronger ones. This would not mean an area would lose its credit union office. Instead, it would operate as a branch of a larger credit union.

The day-to-day operations would change little. There would be the same number of outlets, but fewer balance sheets.

Mr O'Brien said he was concerned at the continuing sharp rise in arrears on loans in many credit unions. And investment losses were continuing to hit the sector. He was also worried about a number of credit unions having sufficient assets to cover liabilities.

"All of these trends are pointing to the likelihood that more credit unions could be heading into financial difficulties," he told chairmen and treasurers of credit unions.

The registrar pinned the blame for failing credit unions on poor management and a lack of oversight by boards and supervisory committees.

The Government has signed up to pushing through legislation as part of the IMF/EU bailout deal, which will allow regulators to force mergers in the credit union sector.

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