DUBLIN, Ireland–Ireland has seen a “spate of mergers” that has led to a doubling in the number of what are considered “large” credit unions in the country, but the
merged institutions have only “marginally improved” their financial performance, according to a new report.
All of the mergers have also meant the number of smaller credit unions has been reduced by half, according to the report from the Central Bank, which regulates credit unions in Ireland.
“There has been official encouragement for the member-owned entities to come together in a bid to cope with increased regulatory burdens and to create more financially sound credit unions,” noted the Independent in its analysis. “But there has not been any major improvement from the link-ups.”
The Independent reported that because regulators can only point to small gains when credit unions merge it’s likely to convince many boards to retain their independence and resist a merger.
Considerable Consolidation
According to the Independent, in the last decade some 154 mergers have taken place, with 135 of these taking place in 2013 when many of Ireland’s credit unions were struggling in the wake of the financial crisis. That resulted in the creation of the Credit Union Restructuring Board by Ireland’s government, which encouraged credit unions to merge and provided advice and even funding for doing so.
There are now 254 credit unions in Ireland, down from 419 in 2008. Fifty-four credit unions in the country now have assets of more than €100 million, up from 28 in 2013.
According to the Central Bank, credit unions that have gone through mergers have seen an increase in their loan portfolios, as opposed to those that have not, which have seen their loan portfolios shrink. The Central Bank report found there has only been a marginal increase in savings balances at merged credit unions.
Government Supports Combinations
“An analysis of the financial performance indicates that transferee credit unions are achieving cost savings and economies of scale, and marginally better returns on assets,” the report states.
Patrick Casey, registrar of credit unions with the Central Bank, told the Independent, “We continue to encourage credit unions to consider restructuring as a strategic opportunity in service of enhancing member services, in achieving scale efficiencies and in consolidating strength in reserves.”