Consultants to review credit union sector as bad debts mount
THE Financial Regulator has appointed management consultants Grant Thornton to review credit union operations in a bid to get a handle on rising bad debts and losses on risky investments.
Grant Thornton, which is the administrator to Quinn Insurance, will examine the financial soundness of the State's 419 credit unions.
The move comes after Minister for Finance Brian Lenihan told the regulator to carry out a root-and-branch review of the way the sector is regulated, and ensure that the stability of the credit union movement is preserved.
Among the areas to be covered are the fitness and qualifications of directors and management, arrangements made by individual credit unions to ensure that they have access to sufficient liquid funds, and limits on commercial or non-consumer lending.
Mr Lenihan had previously sought changes to the way they operated to focus attention on their traditional core priority of protecting members' savings.
In a statement yesterday, registrar of credit unions James O'Brien stressed the need for strong leadership in credit unions to steer them through the economic crisis.
He said the review, "offers a significant opportunity for all credit unions and the sector as a whole, to develop a robust and sustainable business model".
The movement has 2.9m members, and about €14.5bn in assets made up of €7.3bn in investments and €6.8bn in loans.
Bad debts have been rising fast during the downturn. Arrears have doubled in recent years. About 13.5pc of the credit union loan book is now in arrears. That figure was 6pc two years ago, Mr O'Brien told an Oireachtas Committee last month.
Meanwhile, the deadline for submissions on a paper issued by the regulator on the Irish League of Credit Union's Savings Protection Fund has been extended to September 24.