The Central Bank of Ireland has been urged to assist credit unions in devising “judicious and viable” strategies to augment their loan offerings, as stated in an overhaul of the sector’s supervision. The sector has been plagued with insufficient lending and low profitability trends since the financial disaster.
The report, written last year by international credit union regulators from the UK, US, and South Africa, suggested the Central Bank collaborate with credit unions to execute plans derived from laws passed last year to invigorate the sector.
The review suggested that credit unions’ proposals should be prioritised for increased lending, if evidence proved such plans to be sensible and feasible in order to offset the strategic risk tied to the sector’s diminishing profits. The report expressed optimism regarding the shift towards a supervisory model that gives greater flexibility to credit unions demonstrating robust risk management approaches.
The review indicated room for further improvements in data collection from credit unions, data analysis, and public reporting by the Central Bank’s Registry of Credit Unions. It noted enhancements in the Central Bank’s regulatory functions over credit unions since the last international peer evaluation in 2019. Yet, noted potential for advancements in risk management and management of operational risks, such as cyber security, fraud, and climate-related dangers.
The report asserted: “The credit union sector in Ireland still lags behind the technology, risk management and innovation of other developed jurisdictions.” It further asserted that to develop prudently, credit unions must adopt a proactive management strategy for outsourced services to ensure related risks are identified and minimised. It highlighted the need for the registry to revise its strategy to assure that essential service providers for credit unions are managing their risks wisely.
It’s worth noting that lending restrictions were relaxed by the Central Bank early in 2020 to encourage credit unions to extend their long-term lending services, such as home mortgages and business lending. Late in the same year, new laws promoting greater collaboration within the sector were put into effect.
This week, the Irish League of Credit Unions (ILCU), representing more than 90% of operational credit unions in Ireland, revealed that the total loans in the sector over the past year increased by 13.6%, amounting to €5.56 billion, from March to March. Elaine Byrne, the registrar of credit unions at the Central Bank, commented that her team is set to contemplate the conclusions and suggestions of the most recent peer review. She emphasised that the Central Bank is invested in securing the funds of each credit union’s members, whilst simultaneously maintaining the overall financial health and stability of the credit unions.