Monday, 14 September 2015

CREDIT UNIONS WANT TO DO MORE FOR THEIR MEMBERS



Credit unions, are a membership based, co-operative movement. Our mission is to deliver on the social dividend which the government says is at the core of its economic policy. In practice that means 352 credit unions, with in excess of 3 million members in every community in the country are prudently, compassionately, and accessibly making credit available to people who otherwise could not access it, or instead chose credit unions as their go-to community financial resource.

Families, small business, and people of modest means could not function, without credit unions. We are an ambitious, developmental movement with big plans to enable us play a much greater role in delivering affordable finance for housing and small business and modern payments technology. We are deeply engaged with Government through the Department of Social Protection in developing a new model for micro-finance that will enable credit unions deliver effectively in the future, as we once did in the past, on the pressing needs of those looking for very small loans of under €1,000. We are single mindedly focused on the much more we can do, if appropriately regulated, and allowed to do so.

Strong regulation is an essential, not an accessory, in a modern financial environment. Regulation, however, has to be for a purpose.  Clearly it must be prudential.  Our member’s savings must be safe, and all loans must be appropriately assessed and sensible. These are incontrovertible bottom lines, we strongly advocate for. As a movement, that is socially as well as economically orientated, we are fundamentally different from banks. We have members who are owners, not simply shareholders. The motivation behind our prudence with member’s savings, is to make those savings available as appropriate loans for a social purpose.

There is now a growing disconnect between the ethos of credit unions and that of our regulator, the Registry of Credit Unions, which sits within the Central Bank. That disconnect is highlighted again in the recent publication by the Central Bank of the ‘ICURN Central Bank of Ireland Peer Review Report – Central bank Performance of its Regulatory Functions in Relation to Credit Unions’. We note that the ICURN review team expressed concern at the sheer volume and complexity of the requirements with which credit union boards of directors and management must now comply. It is acutely frustrating therefore, that the views expressed on behalf of credit unions in relation to the overly onerous regulatory approach of the Central Bank have not been taken into account or acknowledged.

Regulation cannot be allowed serve simply as a defensive mechanism to protect a regulatory institution scarred by its own, recent failures. It must take those lessons on board and  enable development while simultaneously being prudent. Strongly defending prudent practice, while supporting the developmental social agenda credit unions were established to serve, are complementary not contradictory objectives. Regrettably for now, those two essential, complementary objectives remain at the heart of a regulatory dysfunction which is hampering credit unions, deliver prudently and appropriately for members’ needs.

You might well say, we would say that, and indeed we do. A pressing example of regulation that is hampering credit union s is the Central Banks Consultation Paper 88 (CP88). Again the evidence based concerns of credit unions were ignored. The new regulations, which impose further restrictions on credit unions, are a retrograde step. In enforcing restrictive, one-size-fits-all regulations, the Central Bank is regulating to a degree that ensures appropriate lending is severely restricted, and the financial fundamentals underpinning credit unions are eroded. These regulations place unwarranted restrictions on credit unions, and send out a message that may cause reputational damage to our movement. Most importantly, those that will suffer most are ordinary members – current and future. Notably, speaking in the Dáil on 24 June Minister of State Seán Sherlock stated during a comprehensive debate on credit unions that “the one size fits all regulatory regime being proposed by the Central Bank in Consultation Paper 88, is an exercise in suppressive regulation and micro-management”. There is in fact a wide political understanding, but as yet no effective action, in relation to the highly restrictive nature of credit union regulation.

The imposition of the regulations contained in CP88 is now dependent on the Minister for Finance signing a commencement order for the appropriate sections of the enabling legislation (being sections of the Credit Unions and Cooperation with Overseas Regulators Act, 2012).

What is at stake is the capacity of credit unions to contribute much more socially and economically to communities around the country. Vulnerable people are falling into the clutches of money lenders and paying exorbitant interest rates.  Families and small business are being prevented from accessing car loans, credit for a needed house renovation and seed capital. An exciting developmental agenda that would be a game-changer in terms of choice and access to credit provision is at the starting blocks, waiting to be actioned. Credit unions must be regulated. We also need willing partners who share our vision.