Central Bank admits that credit unions are facing big challenges
THE credit union sector faces big challenges, according to the Central Bank.
It comes after an academic report commissioned by credit unions raised fears of largescale closures and losses, due to a rapid decline in lending.
Registrar of Credit Unions Patrick Casey, who is based in the Central Bank, said there had been modest improvements in the financial performance of the sector, but much more was needed. He said the business model for the sector faced continuing challenges.
The business model refers to how credit unions operate, with criticism that they are too dependent on loans. Loan levels are down around €1bn across the sector in the last couple of years.
“While some modest improvements are noted, at a sectoral level work remains to be done to ensure a sustainable credit union sector into the future,” Mr Casey said.
He said credit unions needed to exploit their uniqueness, the cherished nature of their brand, their local advantages and their high personal interface with their members.
This is a repeat of statements made in December.
The Central Bank was yesterday asked again about the latest report on credit unions that shows they are struggling to survive.
Large numbers of credit unions will close unless they urgently change how they do business, according to the Centre for Community Finance Europe, a research body set up by credit unions in Ireland and Britain.
Already half the State’s credit unions are on course to make losses by the end of this year. The merger mania, which has seen a third of credit unions disappear, has not led the enlarged bodies to perform any better.
Asked about the Centre for Community Finance report, the head of the League of Credit Unions, Ed Farrell, said credit unions were fully aware of the need to expand and diversify their lending.
“The vast majority of credit union lending is in the personal loan market. Although credit unions’ share of this market is largely unchanged over the past five years, overall loan demand is down as consumers continue to focus on paying down debt.”
He said credit unions continue to adapt their lending practices in response to member needs. This includes enabling online loan enquiries, faster loan approval times, removal of restrictive lending practices, such as the requirement to save before applying for a loan.
Mr Farrell said league credit unions were moving ahead with a standardised mortgage solution to ensure that credit unions can expand their loan books. He said member loyalty to credit unions was as strong as ever.