Amounts in Shares

[Engendered11]

Most Credit Unions are carrying huge Share Amounts, & the question I pose is there anything else besides just members shares??

 

[24601]

Do you mean are there any other deposit products? Or are you asking about their balance sheet structures?

 

[Slim]

Most Credit Unions are carrying huge Share Amounts, & the question I pose is there anything else besides just members shares??

Credit unions are structured differently to banks and other institutions. Members' savings are called shares, up to a limit set by CU Act...edited --out of date information.

 

[Engendered11]

In essence do Credit Unions hold not just GAA but sports in general accounts plus say for societies clubs etc, schools. When Newbridge went pear shaped I understand one School hadd in excess of 100m plus

 

[Slim]

In essence do Credit Unions hold not just GAA but sports in general accounts plus say for societies clubs etc, schools. When Newbridge went pear shaped I understand one School had in excess of 100m plus

Yes, they have done so in the past. Not sure if they are still keen on club accounts. A school may be a different category altogether!

 

[Engendered11]

If Credit Unions continue as they are, they will die a slow death. They have two alternatives drastically reduce their Shareholding or go out and lend. I think the latter route is the way to go. For example I do my car insurance online and ditto for amendments why cannot the Credit Union do the same. How relevant is the Common Bond in this day and age. We saw what happened during the downturn the Common Bond was irrelevant so CB forced Cus to join the Irish Credit Bureau. We are coming up to the peak period for car loans in a few weeks, we have an excellent product, but will we lend what we should. If I go into any car website it will automatically redirect me to a finance house. Why is the movement not doing the same instead of spending thousands on archaic advertising campaigns. Get loan officers off their seats and out into the community and tackle the market that the likes of Provident are targeting.
Back to the beginning of the movement-it was set up as a co-operative lending mechanism not as a a Shares & Loans Association which it has now basically become. I have seen in some areas of the country that it took nearly twenty years in some instances to extend the Common Bond. I accept that it was important in getting the movement off the ground and attracting local funds. Where do our student population get their loans, I would say 95% from banks, but Credit Unions are in all probability indirectly funding that lending by just sitting on that share mountain.
All I am asking is that we think differently and adjust our structures accordingly. I do not for one moment advocate that we throw money at people. For starters it might help if the League had its own fully fledged Treasury Department where it could deal directly in Bonds etc.

 

[24601]

Credit unions are structured differently to banks and other institutions. Members' savings are called shares, up to a limit set by CU Act(€26k I think), after that they become deposits and have a separate sub acc no. Some CUs set an overall limit for shares and deposits. CUs can offer tax free share accounts (Special Share Accs). These are not so attractive as dividend rates are so low.

This is nonsense. There's a limit of €100,000 per member since the introduction of new regulations in January 2016. Individual CUs do occasionally set lower caps on shares, and this is becoming more common as loans to asset ratios continue to decline, but very few would have caps as low as €26,000. There's no point at which shares "become deposits". There's also no such thing as special share accounts since changes to DIRT in 2014.

 

[24601]

If Credit Unions continue as they are, they will die a slow death. They have two alternatives drastically reduce their Shareholding or go out and lend. I think the latter route is the way to go. For example I do my car insurance online and ditto for amendments why cannot the Credit Union do the same. How relevant is the Common Bond in this day and age. We saw what happened during the downturn the Common Bond was irrelevant so CB forced Cus to join the Irish Credit Bureau. We are coming up to the peak period for car loans in a few weeks, we have an excellent product, but will we lend what we should. If I go into any car website it will automatically redirect me to a finance house. Why is the movement not doing the same instead of spending thousands on archaic advertising campaigns. Get loan officers off their seats and out into the community and tackle the market that the likes of Provident are targeting.
Back to the beginning of the movement-it was set up as a co-operative lending mechanism not as a a Shares & Loans Association which it has now basically become. I have seen in some areas of the country that it took nearly twenty years in some instances to extend the Common Bond. I accept that it was important in getting the movement off the ground and attracting local funds. Where do our student population get their loans, I would say 95% from banks, but Credit Unions are in all probability indirectly funding that lending by just sitting on that share mountain.
All I am asking is that we think differently and adjust our structures accordingly. I do not for one moment advocate that we throw money at people. For starters it might help if the League had its own fully fledged Treasury Department where it could deal directly in Bonds etc.

Credit unions are certainly struggling with viability challenges but it's not just as simple as going out and lending. The personal loan market in Ireland has halved since the Celtic Tiger years and the CU business model is far too simple to adequately address this. Credit unions are dangerously exposed to the low rate interest environment and the next few years will be tough as the investment income starts to fall off a cliff. There are a few progressive credit unions leading the pack in advancing business model development but it's a hugely difficult task with so many disparate entities all doing their own thing with no sense of cohesion. Depending on your CU you might be able to do what you are talking about with car insurance as many are insurance intermediaries, but then again they do this primarily on a referral basis so few would have the online integration or convenience that's expected in this day and age.

Balance sheet diversification is a must for credit unions and they need to address the fact that the vast majority of their lending is now for small amounts over short repayment terms. This will require a step into the unknown and a more centralised/federalised use of resources so that they can offer competitive mortgage products and other secured lending products to compete with PCPs etc. I don't see what your issue is with the ICB - this has been a Godsend in addressing some of the extremely weak underwriting processes in CUs across the country.

The market that Provident is tackling is not, with respect, one that credit unions can generate much income from. Many CUs are offering the PMC loan product in conjunction with An Post now which offers an alternative to moneylenders. I don't really see the distinction between a co-operative lender and a "Shares & Loans Association", but CUs want to lend - the problem is primarily a demand one and is exacerbated by the massive cost base/ inefficiencies brought about by €14bn worth of assets being split 300-odd ways.

There was an opportunity very recently for credit unions to think differently but this was rejected by credit unions themselves when Eddie Molloy's Advanced Organisation's proposals were refused funding at the ILCU AGM and subsequently scrapped.