Registrar says that credit unions will be hit by new insolvency service

Drawing on the challenges currently facing credit unions, Sharon Donnery, Registrar of Credit Unions at the Central Bank, told atendees at the CUMA Autumn Conference, that loan losses in the sector will likely increase as a result of the new insolvency service which commences next Tuesday.

While average sector arrears, at slightly over 20 per cent, “is broadly in line with the previous year”, Ms Donnery said that it “is to be expected that loan loss experience will be amplified by the new debt settlement arrangements”.

With reference to the fitness and probity regime for credit unions, which was introduced on August 1st, Ms Donnery said the fact that it is being phased in over a period will allow more time for smaller credit unions to comply with the regulations.

On the registry’s overall approach to regulation, Ms Donnery said that it is best encapsulated by an “assertive risk-based supervision underpinned by a credible threat of enforcement”.

Ms Donnery told attendees that a “major focus” of theRegistry’s work in the coming weeks will be considering the tiered regulatory approach, which will allow it to apply regulation to categories of credit unions.

“ This moves us towards providing a more flexible and adaptable regulatory model whereby requirements can be changed over time, if appropriate, without needing changes to primary legislation,” she said, adding that the intention is to engage in a consultation on the proposed approach by the end of the year.

Ms Donnery added that the Central Bank will be publishing the revised Credit Union Handbook next week.