DUBLIN, Ireland–The Irish League of Credit Unions has provided a list of demands for reforms it wants to see, arguing the changes are critical to strengthening the country’s credit union movement. At the same time, at least one credit union has put a cap on the amount of money members can deposit due to the effect on the CU’s capital ratio.
In its case to the government, the Irish League is calling for greater capacity to provide mortgages and business loans and a review of the capital reserve requirements for individual unions.
The Irish league said the changes are needed to “safeguard” the movement moving forward, according to the Irish Examiner.
“The group will approach the new government on the back of a survey of its members, which shows a lowering in consumer borrowing appetites due to Covid-19,” the Examiner reported. “The ILCU said this, coupled with the capital reserve requirements for (credit) unions, will present challenges in the months ahead.”
According to the Examiner, the survey of member CUs shows that the rescheduling of loans, the provision of bespoke banking services for older “cocooning” members, and express lodgment capability have been the three most in-demand services during the Covid-19 crisis.
Furthermore, more than 60% of credit unions have introduced payment holidays for borrowers, while 21% have been more flexible on underwriting, the survey found.
‘Single Biggest Challenge’
The lack of borrowing appetite amongst members is cited as the single biggest challenge facing credit unions, according to the ILCU survey. More than 60% of CUs are worried about operating costs and a decline in income, which could lead to viability concerns, the Examiner reported.
“When credit union CEOs and managers were asked what measures were most important for the new government to introduce to underpin the long-term sustainability of the credit union movement, the most dominant responses were changes to the capital reserving structure required of credit unions and expanding the capacity of credit unions to provide a larger volume of home loans and business loans,” the Examiner added.
ILCU President Gerry Thompson told the Examiner the new government provides the opportunity to work on safeguarding the long-term future of the credit union movement.
“In the coming days, the ILCU will publish a comprehensive policy document which sets out the key policy reform measures which the new government must now introduce to ensure that credit unions, who have long provided a vital financial lifeline to families, communities and businesses, have the capacity to not only continue to do so but to become an even stronger force in community banking in Ireland,” Thompson was quoted as saying.
Strong Position, Despite Failure
The league said overall, the credit union movement in Ireland remains strong and extremely well-capitalized in the wake of provisional liquidators being appointed to Dublin-based Drumcondra Credit Union after it repeatedly failed to meet its capital reserve requirements.
Cap on Deposits
Comhar Linn, the credit union of the Irish National Teachers’ Organization, has introduced a cap of €50,000 after experiencing an €18 million surge in savings this year. CEO Seán Murray, the credit union’s chief executive, wrote to members last week telling them that high levels of savings could be “very challenging” for credit unions.
“Regulatory rules require us to allocate and hold an additional 10% of the value of all members’ savings in our capital reserve account,” Murray wrote. “Put simply, for every €100,000 our members have saved with us, we must allocate €10,000 from our surplus to the reserve,” he wrote.