14 December 2015
By Bryan Smyth
Fianna Fáil Finance spokesperson Michael McGrath (Cork South Central) has called for action to be taken to support the growth potential of credit unions before it is too late to rescue the sector. He was speaking following the publication of the Central Banks twice-yearly macro-financial review last week. In the report, the Central Bank identified a number of challenges facing the sector including bad debts and falling demand for loans and questioned the viability of some smaller credit unions as stand-alone entities. The report states that “Reviews by the Central Bank have raised concerns with regard to the viability of over half of the smaller credit unions, of which there are approximately 170.”
Deputy McGrath commented, “It is not good enough for the Central Bank to claim that the sector is failing to help itself. If there are credit unions which are not strong enough to survive, the Central Bank has had adequate time to ensure action is taken to rectify the situation. The impending deadline of March this year for applications to the Restructuring Board should serve to concentrate minds on all sides.
“However, it is important to remember that problems at certain credit unions cannot be a reason to hold back the growth of the sector generally. The fact that only 2% of loans to Irish households are provided by credit unions is indicative of a sector that is stagnating. A change in public policy is needed to turn this situation around. Credit unions have massively improved their regulatory framework in recent years with professionally qualified people amongst its employed and voluntary staff. The sector has improved its overall reserve ratio without resorting to the type of tactics employed by commercial banks who raised interest rates and charges at the expense of their existing customers.
“Credit unions are co-operating in shared service arrangements and implementing new regulatory and risk management systems. This needs to be reflected in removing some of the overly strict limits being placed on their lending activity. This will allow the sector to thrive and provide real competition to the banks. In so doing, it can provide a major boost to local economies throughout the country.
“A concerted growth strategy is now required. This should involve ensuring that all measures in the Commission on Credit Unions which will help the sector to thrive are finally implemented. The fact that this has not happened to date is an indictment of the large of concern for the sector on the part of the government and Minister for Finance.”