New Fitness and Probity regime for credit unions delayed

Implementation of the new Fitness and Probity regime for credit unions has been moved back until August, in order to give credit unions additional time to prepare.

Speaking at a Credit Unions Managers Association (CUMA) Seminar this morning, Sharon Donnery, the new credit union Registrar, said that the proposed implementation date for the Fitness and Probity regime will be moved from July 1st to August 1st 2013 to facilitate "more efficient communication with credit unions and to provide you with some additional time to prepare".

Ms Donnery added that based on the feedback received during the consultation process for the new regime, some amendments have been made to the regulations and standards, which will be introduced on a phased basis.

“These arrangements will allow more time for smaller credit unions, essentially those with assets of less than 10 million euro, to comply with the regime,” she said.

Of the forthcoming insolvency legislation and the on-going problem of indebtedness, Ms Donnery noted that it was “disappointing” that the Irish League of Credit Unions “ ultimately chose to leave” discussions on an agreed framework.

“Whether you agree with the Framework or not, the reality facing your credit union and many of your members is one coloured by on-going indebtedness,” she said.

In the area of investments, Ms Donnery told credit unions that the key issues to focus on are the trade-off between risk and return and understanding the investments they are making.

“Essentially you need to ensure you have a clear understanding of the costs, risks and benefits of any investments. We have seen many cases over the years, where investors believed they were investing in something which had a level of security which did not come to pass,” she said. .

With regards to capital adequacy, and the new liquidity requirement for banks called the Liquidity Coverage Ratio (LCR), Ms Donnery said that for the purposes of the ratio, credit union deposits are not classified as a separate stand-alone deposit type.

“Rather, it is our understanding that credit union deposits and interbank deposits will both be classified as ‘other liabilities’ and will receive the same treatment,” she said, adding, “I am aware that this is a matter of concern for credit unions and that the representative bodies including those internationally are examining the potential impact”.

With regards to credit unions offering debit card and other payment services to their members, Ms Donnery urged caution.

“Competing in this market requires operational capability and expertise as well as deep pockets to provide the investment necessary to continuously keep up to date with changing customer behaviours, market developments and rapid technological advances such as smart phones, the internet - and other forms of technology that have yet to be developed,” she said.