Credit union movement may need to put its house in order

A major investment in social housing by the credit union movement has not been ruled out by the sector’s regulator, the Central Bank’s Registry of Credit Unions.

Registrar Anne Marie McKiernan has warned the credit unions that they need to carry out more reorganisation following a series of high-profile difficulties with individual branches in recent years.

The "vision", she told them last year in a submission to an Oireachtas committee, is for a thriving credit union sector "carrying out its important role at community level".

Questioned about growing ambitions now to set up an “off balance sheet”multi-billion euro fund to provide social housing, the Central |Bank did no more than refer callers to Ms McKiernan’s Oireachtas paper.

Then, she said it was “most important for credit unions to focus on getting the basics right”, particularly lending for personal finance and to small businesses.

This, she said, is the area “in which the credit union brand is best established and where it has expertise”. In the eyes of many, McKiernan is giving a polite nod to the credit unions not to overreach in their ambitions.

More “restructuring” is needed to deal with the unions’ sins of the past, she said, while they also needed to find more younger members, increase sustainable lending and develop in “a well-managed way”.

Acknowledging that there has been "some criticism" from within the credit union movement that the Central Bank was holding back the development of new business, she stressed the need for "prudent", patient growth.

Proposals for social housing did exist, she said. “We do want to work with the sector bodies and the credit unions to see whether the proposals are proportionate, appropriate and viable for the sector.”

Earlier this year Fianna Fáil's finance spokesman Michael McGrath launched his own plans for the credit union movement before the general election. He vowed to get rid of the €100,000 cap Minister for Finance Michael Noonan put on depositors' credit union funds. The credit unions opposed Noonan's plans to impose the limit, which came into force last year, and have not stopped complaining about it since.

Irish League of Credit Unions’ chief executive Ed Farrell said the cap, along with restrictions on a loan’s term and type, puts the movement at a significant disadvantage to the banks.

McGrath also proposed easing restrictions on lending beyond a 10-year term. That would allow them to offer mortgages for private homes, an area the regulator wants them to stay away from.

The credit union movement which includes the Irish League of Credit Unions and the Credit Union Development Association as well as unaligned credit unions has total assets of about €15 billion. In 2008 it had €7 billion in loans, but by last year this had fallen to €4 billion, with a consequent drop in credit union income of 40 per cent.