RegSol Blog

Credit Unions: What Does the Future Hold?

September 2020

Credit Unions are at the heart of many communities in Ireland both urban and rural.

As per the Irish League of Credit Union’s (ILCU) website there are currently across Ireland (both North and South) 326 Credit Unions, 3.6 million members and savings of €14.8 billion.

The credit union movement has its roots in volunteering with many people giving of their time and efforts to run local credit unions. Despite the voluntary and co-operative aspects, they are subject to the same stringent regulations as entities where making profit is the motivation.

In the July 2020 Report “The Movement” the current situation for credit unions and their future was discussed. The report outlines various aspects of the situation including what credit unions want and makes policy recommendations for government consideration. It is clear change is needed.

Credit union members want the personal touch and local knowledge but also want access to mortgages, small business loans and other financial products. Many credit unions would like to offer further services but due to current regulations are not able to do so.

It seems the current regulatory requirements are strangling the growth and development of credit unions. The 10% capital reserves requirement means “that many credit unions are faced with an ongoing challenge of bolstering their reserves to maintain this reserving level”. Every €1000 of savings a credit union has needs to be matched by €100 in a trading surplus. In the current climate caps on the amount of savings a member can have with their credit union are becoming more common.

The current President of the ILCU, Gerry Thompson stated in a recent interview "I think it's Government's job to recognise the fundamental difference between voluntary, community-based credit unions and banks - and find a proper framework."

As we are mid pandemic and new Government is just in, it is extremely unlikely that we will see any changes to the regulatory environment for 2020. What is clear is there remains a call for change from within the sector and the relationship between credit unions and the central bank will need to continue to evolve.

Click HERE to read the full report.

By Judy de Castro
Regulatory Consultant