WELLINGTON, New Zealand–In what is being described as a “preview of the future for small, niche credit unions and mutuals” around Australia and New Zealand, members of one credit union who voted against a merger are being told a future combination will have to happen.
“New Zealand’s Firefighters Credit Union is facing up to the reality of unsustainability – and fighting to convince its membership that a merger with a larger credit union is inevitable,” reported BankingDay.com.
The news outlet noted that earlier this year NZFCU attempted a merger with credit union Bayside, but members voted down the plan.
Now they are trying again to convince their firefighter members to accept the inevitability of a merger, with a vote slated for the November annual general meeting, the report added.
"The difference this time is we won’t be recommending which credit union we can merge with – rather just asking members to vote whether they support the option," said acting chair Mark Virtue in a message to members on the NZFCU website. "Remaining as a going concern is no longer a viable option because of rising compliance costs and our inability to make a profit.”
According to BankingDay.com, the other option, if members continue to oppose a merger, is "an orderly wind-up" of the credit union that began with a 1976 meeting at the Central Fire Station in Wellington.
Wellington Firefighters Credit Union grew into the New Zealand Firefighters Credit Union in 1981, allowing nationwide membership.
‘Model is Unsustainable’
In an earlier message to members, BankingDay.com reported Virtue warned that, "without changes to how we operate, our current model is unsustainable in the long term", saying increasing regulation has made New Zealand "a tough place to do business".
"The financial sector is highly regulated and the fact that we are a small credit union rather than a mainstream bank doesn’t protect us from the audit and compliance expenses that are associated with our industry,” Virtue stated. “As a niche business we have not had enough growth to compete with the likes of audit fees, which for example in our 2020 financials increased by NZ$156,000 alone," he said.
BankingDay.com reported that Virtue’s statement continued, "In the last 12 months we have aggressively sought to reduce the costs that we could control. We literally run on the ‘smell of an oily rag’, and have reduced our outgoings in areas like wages (down 21%), legal costs (down 50%), accounting fees (down 33%) and how we run our office.
‘Fireworks’ Expected
"However, [we have] other expenditure which we are powerless to control and required by regulations to have, continue to increase. Such a cost is our audit costs, which have increased over 400% in the last three years."
The publication said “fireworks” are expected during the upcoming AGM.