NZ laws hamper credit unions

CANADIAN CREDIT union bosses visiting this country are surprised restrictive legislation is being allowed to suppress the economic potential of credit unions.

Though the combined credit unions of New Zealand call one in 25 Kiwis members, and are behind only the big four Aussie banks and Kiwibank in the volume of financial transactions they handle, that’s nothing compared with Canada.

Canadians Richard Thomas and Linda Archer from Central 1, the central financial facility and payments settlement centre for credit unions in British Columbia and Ontario, said not only did credit unions have more than a third of mortgage market share in parts of Canada, but they were big lenders to small businesses.

That contrasts with New Zealand where, because of restrictive laws, credit unions are unable to lend to small firms.

Henry Lynch, chief executive of the New Zealand Association of Credit Unions, said regulations were so tight here that credit unions had to seek permission from external trustees just to buy new office furniture.

The Canadian visitors, who were in the country last week to form a long-term partnership with their New Zealand counterparts to share lessons learned, said they were shocked to find how disadvantaged the credit unions were in their bid to grow and compete with the banks.

‘‘You are a creature of your legislation,’’ said Thomas. ‘‘There is a clear role for government to take a proactive stance and interest in seeing the credit unions grow and develop and contribute to the economy.’’

In some areas of Canada, Thomas said, big banks had simply pulled out of some communities, leaving the credit unions, owned by members unlike shareholder-owned banks, as the only lenders to small business.

Lynch said politicians just did not seem to understand credit unions, which served many lowerincome people. Labour, when in power, failed to change the laws so they could compete effectively with the Australian-owned banks.

‘‘National have done more than Labour did in getting the Regulatory Reform Bill through. Under Labour there was a decade of delay,’’ Lynch said.

That regulatory reform allows credit unions to take deposits of more than $250,000, but does not allow it to lend to business or raise capital to grow.

Despite the restrictions, Lynch said, the association had the option of securitising of loans. That would allow the credit unions to compete more effectively in the home-loan market, though no decision to go ahead with that had been taken.