Tiered regulation of this sector makes sense

THERE are around 300 credit unions in the State, even fewer are active, but they range in scale from large bank-like institutions to parish level shared saving schemes.

Tiered regulation would mean a tougher standard of regulation for those bigger unions that manage tens of millions of euro and offer a wider range of products, and a less burdensome regime for small players that play a limited but valuable social and economic role.

That shouldn’t mean lower standards of supervision of enforcement by the Central Bank, just less complex rules for the managers of simpler institutions.

We do that with food, for example, where the inspection regime for factories is different than those for retail outlets.

Regulation is necessary but expensive, because by and large it means additional paperwork. That means more time, and crucially it means bigger professional and legal bills.

There’s a real danger that a one-size-fits-all model, inevitably designed to supervise the upper end of the market, will force smaller unions to close.

So it makes sense to ratchet the regulatory burden up and down to reflect the real risk posed by different sizes of credit union – to their members and the financial system.

There have been some high profile failures in the sector, but it is worth bearing in mind that they are rare and are dwarfed by the far worse, and more costly, disasters in the “professionally” run banks.

Credit unions have a real value. It has been proven again by their recent success as the cutting edge in the fight against high cost money lenders.

In their early years, the credit unions opened up access to loans to swathes of the population who were traditionally ignored by banks.

As we enter the era of big data, there is a real danger that significant numbers of people will again end up being locked out of the banking market.

A robust, rooted and viable credit union movement adds enormously to the resilience of the entire economy. Regulation needs to be sophisticated enough to allow those values to thrive, regardless of scale.