CU merger a win-win

The proposal by Dundalk’s two large credit unions, Dundalk and Cuchullain to merge is not surprising given the consolidation that has taken place within the credit union movement in the country.

Naturally there is some concern, expressed by members of smaller credit unions who are ‘swallowed up’ by the larger unions, that they will lose their identity in the merger.

That may be so, but the reality of the modern financial world in the wake of the financial crash in 2008 is that central banks in all European countries are insisting on far greater governance in financial institutions, and in that regard the central bank has been the motivator behind the move to see credit unions merge in line with regulatory and legislative requirements.

The merger won’t mean all that much difference to the members of the two credit unions in Dundalk, should it be approved at meetings of the respective members to be held later in the summer, for they will be able to avail of all the services that were previously available and which are valued so much by all members.

The merger will however enhance the balance sheet of the new body which will have assets approaching €300m. and reserves of €50m.

What is just as important, there will be funds in the region of €200m available to lend.

For some time now larger credit unions created through mergers have been anxious to challenge banks so that they can offer a wider range of services, instead of just offering savings and loan products.

Some predict that the larger credit unions will become ‘mini banks’ capable of competing with the likes of AIB, BOI and Ulster bank for business.

Under current rules however credit unions can only issue 10% of their individual loan books in long term lending, such as mortgages which is the area most cherished by the credit union movement for it is a lucrative market, and one in which they feel that they can provide a badly needed service for their members as well as providing welcome competition to the banks and buildings societies.

The credit union movement has the money too, an estimated €5bn. to loan out, but the central bank continually insists that credit unions come up with creditable business plans to boost their balance sheets before widening their mortgage offering.

Credit unions, such as Dundalk and Cuchullain have come a long way since they were established in town more than 50 years ago, and great credit must go not just to the staff but the volunteers who serve on boards of directors for they give freely of their time and expertise to ensure that members’ savings are well looked after.

Obviously if the movement is to progress to compete on a level playing field with banks and other institutions, then new structures with regard to long term and mortgage lending will have to be put in place, and the central bank must be involved in this process.

Many feel that Dundalk, which will be one of the larger credit unions after the merger, and which has been a life saver in many respects to a generation of townspeople, is well capable of taking the next step needed to maintain their development.