Credit Union bad egg does not a crisis make
THE publicity surrounding the debacle at Newbridge Credit Union is not doing justice to the movement as a whole. Clearly Newbridge was a particularly extreme case, which does not reflect the reality on the ground of many credit unions.
There is a tendency to see the current problem as a brand new crisis.
These issues have been around for five years. It has just taken time to work through to solutions.
There are 100 credit unions on a Central Bank watch list. That doesn't mean 100 of them are going under. It doesn't mean there is a major new crisis.
Depositors are protected up to €100,000 and several options are open for resolving credit unions that have bad debt issues.
Mergers will happen and we may end up with fewer credit unions. The cost of the clean-up has been put at €500m.
The last government guaranteed the banks without knowing how bad the loans would get. The Central Bank knows very well about loan problems at credit unions.
If €500m proved to be the figure, it would be less than 10 per cent of the cost of Irish Nationwide alone. Credit unions have an important role to play in the future provision of financial services in Ireland, especially given the decimation of the sector and the resultant lack of competition.
But they will have to be subject to greater supervision, invest in training and IT, professionalise management, as well as bolster their capital position in some cases.
Some credit unions have to raise their game. Others, unlike banks, were top of the class even during the boom.