Friday 24 January 2020

Central Bank should improve interactions with credit unions - international report

Scrutiny: Registrar of credit unions Patrick Casey is to review the findings
Scrutiny: Registrar of credit unions Patrick Casey is to review the findings

Charlie Weston PERSONAL FINANCE EDITOR

THE Central Bank needs to improve its communications with credit unions about how it regulates them. And the regulator of the industry also needs to recognise the diversity within the credit union sector, a major peer review of how the Central Bank deals with the local lenders has found.

The review said that the Central Bank effectively performed its regulation and supervision of the credit union sector, but highlighted improvements that could be implemented.

It was undertaken by an experienced team of international regulatory experts from the International Credit Union Regulators' Network (ICURN).

The review found credit unions had a low level of awareness of the annual Probability Risk and Impact System (Prism) reports carried out by the Central Bank.

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The authority was also told to better-notify credit unions when there was a change of Central Bank supervisor.

There is said to be a big role for the regulator in supporting risk management frameworks in credit unions, which can be weak. According to the peer review, unions that improve their risk profile should benefit from increased flexibility from the register of credit unions at the Central Bank.

This would allow larger and more successful credit unions to expand, it is believed.

More regulatory staff are needed for on-site inspections, meanwhile.

The peer review recommends that the Central Bank needs to do more to encourage credit unions when they attempt to develop additional services.

"Setting out explicit and clear expectations would aid efficiencies and limit uncertainty on the part of developers and participants," the peer review stated.

It comes after controversy in 2016, when 11 credit unions that were trying to launch a debit card were told they did not have the approval of the Central Bank, despite the initiative being announced.

There was confusion over whether or not the initiative had the approval of the regulator.

The latest report follows huge consolidation within the sector.

The number of credit unions has fallen by 122 over the past four years to 248.

This has meant a third of stand-alone credit unions have disappeared.

Credit unions have a strong brand, the international reviewers also found, but their return on assets continues to decline.

However, assets have grown and the level of non-performing loans has come down since the last peer review in 2005.

Registrar of credit unions Patrick Casey said the Central Bank recognised the importance of external scrutiny, and it would consider the findings and recommendations in the review.

Irish Independent

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