Credit unions deserve to be encouraged, as well as regulated, by the Central Bank

ARE credit unions subject to too much regulation by an overbearing Central Bank hell-bent on keeping them down? That is certainly the view of many in the sector who feel that the locally-owned lenders are hampered at every turn by their regulators at a time when the challenges they face have never been greater.

Many in the sector complain about what they regard as heavy regulation from the Central Bank. A multiple of new regulations were imposed on credit unions since the banking collapse a decade ago.

They also argue that they are forced to pay four different levies administered by the Central Bank to cover failures in the sector.

Yes, there have been six credit union failures in the last few years. Newbridge, Berehaven, Rush and Charleville were shut down, while the High Court ordered the transfer of Howth Sutton and Killorglin to larger neighbours after they got into difficulty.

There are now 264 active credit unions, down from close to 400 in 2013 following a spate of Government-encouraged mergers.

But the scale of the collapses in the credit union sector have been nothing like those in banking.

At one stage the Government and the Central Bank were warning that a €1bn bailout would be required for the sector.

In the end, just four credit unions have needed public funding, with the total cost a fraction of the initial estimate.

And €250m Exchequer funds put in place to ease the merger of weak credit unions with stronger ones has only used €12m of its funds.

Credit unions also compete with one hand tied behind their backs.

They compete in the motor finance space with providers of PCS (personal contract plans), which are largely unregulated.

Crowdfunding is also unregulated, but this too eats into the borrower pool for credit unions. The registrar for credit unions, Patrick Casey, rejects any notion that the sector is over-regulated.

Suggestions they are overburdened is outdated, he told a Credit Union Development Association (CUDA) conference.

The regulation is tailored and proportionate. All of that is true, but the Central Bank needs to put more stress on the unique nature of credit unions, which are member-owned and have a community ethos.

Tiered regulation would help, as it would mean the larger ones would be regulated differently to smaller ones.

They are not banks and have not stolen tracker mortgages like banks. Credit unions deserve to be encouraged and fostered — as well as regulated — by the Central Bank, as they are in Canada.