DUBLIN, Ireland–Ireland’s Central Bank said it plans to conduct onsite inspections of credit unions and interviews with management later this year as part of a thematic review of a review of how risk management issues are being handled.
Patrick Casey, the Central Bank official who regulates the 326 cooperative savings and loan institutions in Ireland, told the Irish League of Credit Unions (ILCU) annual general meeting that boards needed to address “fundamental and recurring risk issues,” the Independent reported.
Casey “criticized” persistent governance and risk management weaknesses among credit unions and accused the sector of a “lack of maturity” for failing to address its problems, according to the Independent.
“We are encouraged to see instances of effective governance in some credit unions,” he told the publication. “The overall picture, however, is not so positive. We continued to identify examples of fundamental governance and risk management weaknesses in many credit unions. Recurring risk issues here are a prudential concern. They evidence a lack of maturity in the credit union risk management process.”
‘Critical Line of Defense’
Casey further told the Independent good governance was a “critical line of defense” for credit union members and that boards needed to take action now to improve “basic” shortcomings in lending standards and underwriting.
A spokesperson for the Irish CU League responded by telling the publication the speech “was what delegates largely expected from a regulator whose statutory mandate is to ensure credit unions function with the benefit of strong governance and robust risk management.”
“While he outlined his prudential concern of recurring risks due to governance and risk management weaknesses in many credit unions, he acknowledged that the real challenges are commercial in nature, and they’re about finding ways to lend to more economically active members,” the spokesperson told the Independent.
Savings Glut
The Independent noted the country’s credit unions increased lending by only €38 million – €36million to households and €2 million to businesses – in 2020 as deposits poured in due to the pandemic savings glut and low demand.
As CUToday.info has reported, the inflow of deposits has been so strong and lending so flat that some credit unions have placed caps on deposits due to the negative interest rates being charged by the Central Bank.