# Credit Union Restructuring Board CEO Resigns



## WizardDr (20 Aug 2014)

[broken link removed]

Donal Coughlan REBO CEO has resigned.

Was much impact made?

Does anybody know?


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## WizardDr (21 Aug 2014)

No impact at all?


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## Brendan Burgess (21 Aug 2014)

According to the Indo 

http://www.independent.ie/business/...o-merger-plans-at-credit-unions-30524694.html

12 credit unions have merged to create 5 new entities. 

133 are looking at mergers. 

Brendan


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## WizardDr (31 Aug 2014)

Gosh that was a massive number of mergers in a year ..about 3%


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## Brendan Burgess (31 Aug 2014)

I see very little point in mergers. They are just distractions from the main problems which they need to address.

But it's not Rebo's fault.  The Credit Unions do not want to change their ways at all. 

Brendan


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## MrEarl (31 Aug 2014)

Brendan Burgess said:


> I see very little point in mergers. They are just distractions from the main problems which they need to address.
> 
> But it's not Rebo's fault.  The Credit Unions do not want to change their ways at all.
> 
> Brendan




Merging may help combine resources (particularly more capable staff) and help reduce overheads, specifically with regards to premises so mergers are not all bad.

That said, I'm sorry to say I agree with you in terms of the Credit Unions not wanting to change their ways ... they have to move on with the times.

I personally think we would benifit far more from "Super Credit Unions" being a combination of up to something like fifty credit unions in a particular region - in theory, a bit like the old TSBs.


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## wbbs (31 Aug 2014)

Mergers solve some problems, most smaller credit unions will not have sufficient staff or resources to implement all the new controls that Central Bank has put in place.  Merging with bigger CU's will enable this to be achieved so even a profitable small CU has not a hope of continuing on in the new environment where they are being treated like mini banks with the increased regulation.  

Practically all banks have head offices to take on a lot of these functions but each credit union is a standalone entity with no head office departments to take care of these issues.   So as they become more bank like, whether that is bad or good, they will need to merge to create bigger organisations where there can be dedicated staff to areas such as compliance, audit etc, this is simply not possible in the smaller ones with a handful of staff.


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## WizardDr (11 Sep 2014)

@wbbs I agree with the sentiment. The Central Bank has gone insane. They have even redefined 'insolvency' in the recent Berehaven case.


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## CU Manager (6 Oct 2014)

WizardDr said:


> @wbbs I agree with the sentiment. The Central Bank has gone insane. They have even redefined 'insolvency' in the recent Berehaven case.


 
More like created an insolvency. The Berehaven loan book dropped like a lead balloon due to the restrictions placed upon it by the Central Bank and this created a completely lopsided balance sheet with mostly low earning assets engineering a situation where the CU could no longer carry its costs.

The Central Bank is full of paper pushers and theoretical whizz kids who simply would not survive in the real world that the rest of us have to operate in.


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## Brendan Burgess (6 Oct 2014)

CU Manager said:


> The Berehaven loan book dropped like a lead balloon due to the restrictions placed upon it by the Central Bank



While the Central Bank's restrictions on many credit unions are crasy, I don't think that this is fair. 

In general, the demand for CU's services is falling rapidly making them less viable, but specifically, Berehaven was the primary author of its own misfortunes. From the CB report

[FONT=&quot]28[/FONT][FONT=&quot].          Those  reviews have highlighted that the BCU Board has failed to maintain  adequate internal  controls  and  governance.    The  common  issues   and  concerns  identified  by[/FONT]
  [FONT=&quot]independent third parties are as follows:[/FONT]

_[FONT=&quot]L[/FONT]__[FONT=&quot]ending practices[/FONT]_


·    [FONT=&quot]Inadequate assessment of borrower ability to repay[/FONT]

·    [FONT=&quot]Inadequately documented credit assessment of borrower ability to repay[/FONT]

·    [FONT=&quot]Credit concentration risk – high level of lending to a low quantum of borrowers[/FONT]

·    [FONT=&quot]L[/FONT][FONT=&quot]ending to members in arrears on their existing borrowings[/FONT]

·    [FONT=&quot]Irregular practices concerning loans to officers of BCU including in respect of loan approval[/FONT]
·    [FONT=&quot]Inadequate anti  money laundering procedures including a failure to establish the  identity of the borrower and the address of the borrower[/FONT]





_[FONT=&quot]S[/FONT]__[FONT=&quot]p[/FONT]__[FONT=&quot]ecific weaknesses in respect of financial reporting and controls[/FONT]_


·    [FONT=&quot]BCU’s general ledger is manually prepared and is paper based[/FONT]

·    [FONT=&quot]Weaknesses in the preparation of management accounts[/FONT]

·    [FONT=&quot]N[/FONT][FONT=&quot]o documented policies and procedures relating to the internal financial reporting control environment[/FONT]
·    [FONT=&quot]N[/FONT][FONT=&quot]o individuals suitably qualified in accounting were involved in the preparation of monthly management accounts[/FONT]
·    [FONT=&quot]N[/FONT][FONT=&quot]o fixed asset register[/FONT]

·    [FONT=&quot]H[/FONT][FONT=&quot]igh risk bank and cash control practices[/FONT]


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## Gerry Canning (6 Oct 2014)

Am with Cu Managers (poor) opinion on Central Bank.
Am with Brendan that Berehaven were authors of their own downfall.
On the flaws on Berehaven , it was an outlier.
1. Inadequate assessment = like the Banks.
2.Ability to repay = like the Banks.
3. Low Quantum of borrowers = like the Banks .
4. Lending to those in arears = suicide business!
5. Loans to staff= like the Banks.

And now Central Bank etc want mergers = like the Banks.

I am not atall convinced that amalgamation is any sort of panacea, from what I have seen most Credit Unions are well run.
They are not Banks and I am afraid Central Bank will push them away from their local strength on the altar of Compliance , this sudden new found compliance  was brought about by the mess Banks and their supposed Regulators let happen.

In general Cu,s do not require to be stifled by more Rules .


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## CU Manager (6 Oct 2014)

Brendan Burgess said:


> While the Central Bank's restrictions on many credit unions are crasy, I don't think that this is fair.
> 
> In general, the demand for CU's services is falling rapidly making them less viable, but specifically, Berehaven was the primary author of its own misfortunes. From the CB report
> 
> ...


 
Brendan,
The Central Bank sent in a large accountancy firm with a clear agenda . Their findings, outlined in the High Court report are subjective and in some cases dubious:

· [FONT=&quot]Inadequate assessment of borrower ability to repay[/FONT]
*Subjective assessment by the accountants*

· [FONT=&quot]Inadequately documented credit assessment of borrower ability to repay[/FONT]
*Again, this is subjective. The lending may have been more informal than the accountants are used to but not necessarily bad*
· [FONT=&quot]Credit concentration risk – high level of lending to a low quantum of borrowers[/FONT]
*More subjectivity and little detail*

· [FONT=&quot]L[/FONT][FONT=&quot]ending to members in arrears on their existing borrowings[/FONT]
*This is one that can be easily distorted to suit an agenda. I had this very accusation levelled at my CU. When we drilled into the "findings" the arrears were found to be technical arrears, anything from 0.01 arrears upwards were counted as accounts in arrears whereas the members were in fact up to date - but a nice stat to use if you want to paint a particular picture*

· [FONT=&quot]Irregular practices concerning loans to officers of BCU including in respect of loan approval[/FONT]
*Ok, but could the errant practice be stamped out with closing the place down?*
· [FONT=&quot]Inadequate anti money laundering procedures including a failure to establish the identity of the borrower and the address of the borrower[/FONT]
*I can see this happening in rural areas where everyone knows everyone else. This could have been changed easily enough though without the need for closure*




_[FONT=&quot]S[/FONT]__[FONT=&quot]p[/FONT]__[FONT=&quot]ecific weaknesses in respect of financial reporting and controls[/FONT]_


· [FONT=&quot]BCU’s general ledger is manually prepared and is paper based[/FONT]
*But was there mistakes in the general ledger?Granted a computer based GL system would be better, there is no mention of material errors on the paper based GL system*
· [FONT=&quot]Weaknesses in the preparation of management accounts[/FONT]
*More subjectivity - any mention of material errors*
· [FONT=&quot]N[/FONT][FONT=&quot]o documented policies and procedures relating to the internal financial reporting control environment[/FONT]
*Is this a legal requirement? Thought not*
· [FONT=&quot]N[/FONT][FONT=&quot]o individuals suitably qualified in accounting were involved in the preparation of monthly management accounts[/FONT]
*A qualified accountant to prepare management accounts in a small CU - someone's having a laugh!*
· [FONT=&quot]N[/FONT][FONT=&quot]o fixed asset register[/FONT]
*Oh dear! Any assets missing I wonder*
· [FONT=&quot]H[/FONT][FONT=&quot]igh risk bank and cash control practices[/FONT] 
*And we're back to subjective again. Any cash losses from these "high risk" practices?*

While there may have been some wrongdoing or questionable behaviour occurring, much of the findings were nothing short of a hatchet job from accountancy firms paid to do their masters bidding (The Central Bank).
Nothing outlined justified pressing the nuclear button. The High Court was easily lead!


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## Gerry Canning (6 Oct 2014)

Cu Manager;

You are on a roll today ! 
Maybe Berehaven may not be your best Union to use , but your points are well mde.


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## Brendan Burgess (6 Oct 2014)

Hi CU Manager

Why do you think the Central Bank singled out Berehaven? 

If they were doing this for every credit union in the country, I would accept your conspiracy theory.

But they had serious concerns about just this credit union which appears to have made a lot more bad loans than most other credit unions.

Brendan


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## CU Manager (6 Oct 2014)

Brendan Burgess said:


> Hi CU Manager
> 
> Why do you think the Central Bank singled out Berehaven?
> 
> ...


 
Bad loans were definitely made but when you put the tightest restrictions ever placed on a lender into a small institution like BCU and then watch the loanbook shrivel up, you can only expect the bad loans to remain and thus trigger an insolvency situation as happened here.
The Central Bank oversaw a 90% fall in the loanbook and did nothing to alleviate the cause - their own restrictions.
The percentage of bad loans would not be as high if the CU was allowed to lend normally - this is just basic arithmetic

The Central Bank has played a waiting game and is picking off credit unions in a very strategic manner. They have moved against small balance sheet CU's (Howth and Berehaven) while allowing remedial action to occur in larger CU's that the Central bank more afraid of (I won't name them but there are about a dozen).
The Central Bank has tested all the weapons bestowed upon it by the 2011 Act, first a high court directed transfer (Howth) and now a liquidation (Berehaven).
The Central Bank has at least 20 CU's in the Berehaven category but rather than fix them, they allow their balance sheets to be depleted and thus create an insolvency situation and effectively deny their members a proper service and access to credit. A responsible regulator would not conduct its business in this fashion!


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## Brendan Burgess (6 Oct 2014)

Hi CU Manager

Around half of Credit Unions are not subject to special lending restrictions. Hasn't their lending fallen dramatically as well? 



> The percentage of bad loans would not be as high if the CU was allowed to lend normally - this is just basic arithmetic



The Central Bank was rightly worried that there was not enough capital to fund the losses on the existing loans. Allowing Berehaven to make further loans, would increase the absolute losses, even if it reduced the percentage. 

As I said, the CU restrictions are excessive.  But the Credit Unions are the authors of their own misfortune.


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## CU Manager (6 Oct 2014)

Another point to note about the ridiculous finding that nobody was qualified to produce the accounts for the credit union is that the responsibility to present the accounts to the Board of Directors lies with the CU Manager under the Credit Union Act.
The position of Manager is now a pre-approved control function requiring the Central Bank to approve the appointment. Therefore, why has the Central Bank approved appointments of non accountants to these roles in numerous credit unions since the fitness and probity regime came into being?
They throw the cart and all into these reports to paint a picture of the "wild west" in a credit union it want to shut down but at the same time allows such "failings" to continue ion credit unions elsewhere


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## CU Manager (6 Oct 2014)

Brendan Burgess said:


> Hi CU Manager
> 
> Around half of Credit Unions are not subject to special lending restrictions. Hasn't their lending fallen dramatically as well? .


 
 Not by 90% in a few years Brendan, - the restrictions in this case were particularly excessive



Brendan Burgess said:


> The Central Bank was rightly worried that there was not enough capital to fund the losses on the existing loans. Allowing Berehaven to make further loans, would increase the absolute losses, even if it reduced the percentage.
> 
> As I said, the CU restrictions are excessive. But the Credit Unions are the authors of their own misfortune.


The only way the credit union could have generated enough capital was to continue as a going concern and earn income from a  functioning loanbook. The Central Bank prevented this from happening. Kinder regulatory actions could have brought about operational changes - its not necessarily true that the absolute losses would have increased - although that is what the Central Bank wish you to think


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## Brendan Burgess (6 Oct 2014)

So what would you have done if you were the regulator facing high bad loans in a Credit Union which had ignored your directions on a few occasions?


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## CU Manager (6 Oct 2014)

Brendan Burgess said:


> So what would you have done if you were the regulator facing high bad loans in a Credit Union which had ignored your directions on a few occasions?


 
The Central Bank has a load of options open to it under the 2011 Act- they could have removed directors and forced operational changes to change the errant behaviour. They spent 3 years presiding over a rapidly declining loan book & did effectively nothing except wait to press the nuclear button.
Rather than ask me what I would do - would you agree that what the Central Bank did achieved the least optimal outcome?


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## RichInSpirit (6 Oct 2014)

I've a suggestion to make re the credit unions and central bank.
The Credit Unions were traditionally a lender of small loans to people who were too poor to borrow off the banks.
My suggestion is to completely remove the central bank's regulation of the credit unions but to put a small cap on the amount that they can lend to any one person. And maybe a similar cap on shares or deposits.
€10000 is the cap I'm suggesting.


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