Thursday 14 November 2019

Central Bank insists credit unions are not over-regulated

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Charlie Weston

Charlie Weston

Credit unions are not over-regulated and any suggestion that they are is outdated, the Central Bank official who oversees the sector has insisted.

Registrar of credit unions Patrick Casey said the regulation of the locally owned lenders was tailored and proportionate.

Credit unions have long complained about what they see as heavy regulation from the Central Bank.

They argue that since the banking collapse a decade ago they have had multiple new regulations imposed on them, including a fitness and probity regime. They also argue that they are forced to pay four different levies administered by the Central Bank to cover collapses in the sector.

Since the banking blowout there have been six credit union failures. Newbridge, Berehaven, Rush and Charleville were shut down, while the High Court ordered the transfer of Howth Sutton Credit Union to Progressive Credit Union, and Killorglin to Tralee after they got into difficulty.

There are now 264 active credit unions, down from close to 400 in 2013 following a spate of Government-encouraged mergers.

At the height of the financial downturn, the Central Bank and the Department of Finance claimed two years ago the cost of bailing out stricken credit unions could be as high as €1bn. But the cost turned out to be a fraction of that.

Mr Casey rejected any suggestions the Central Bank had come down too heavily on the sector when speaking at the conference organised by the Credit Union Development Association (CUDA), which represents some of the larger credit unions.

"We have seen six cases of credit union failures since 2013, and whilst small in number, they represent very significant developments in the evolution of the sector."

Mr Casey said poor governance was the root cause of all the failures.

"It clearly follows that there is a need for ongoing strengthening of governance to prevent credit union failures from re-occurring into the future. It is therefore surprising to us that we still occasionally hear references from some within the sector to over-regulation. It speaks to an outdated mind-set grounded in the past."

The registrar said the reality is the regulatory framework applying to credit unions is tailored and proportionate and continues to evolve. He said credit unions have frequently been excluded from the application of a range of EU and domestic regulation which applies to other regulated financial service providers.

Mr Casey warned the Central Bank is considering making its Consumer Protection Code apply to credit unions.

He said as credit union business models evolve towards more complex products such as mortgages, credit unions automatically become subject to a broader range of mandatory European and domestic regulation.

Irish Independent

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