Credit union commission rubber stamps central bank strategy

[kaplan]

The recommendations of the commission on credit unions are bang in line with the powers the central bank is being granted in any event to sort out non-viable and viable credit unions. The commission is simply agreeing with what is already happening.

According to its authors there are 27 unions severely undercapitalised and another thirty or so undercapitalised. The media missed the important rider to this data – these numbers will grow by year end as credit unions factor in loan and investment losses and another year of declining return on assets.

The report does not provide any info on the banks credit union PCAR test or findings of the Grant Thornton review save to say that without intervention the risk profile will worsen by 2013. The Minister for Finance €1bn rescue fund is no doubt required to provide the funds needed by the bank to stabilise less damaged operations and fund post-merger balance sheets. Credit unions will be required to fund stabilisation by contributing 1% of assets which amounts to c€140m - there's no mention of ILCU's existing €120m stabilisation fund which has already committed over €50m to about twenty viable and non-viable credit unions. The report mentions that 17 credit unions have not yet published accounts for 2010.

With extensive new powers, the bank can take over the management of credit unions , close them down and transfer their business to others. Swinging change will also see boards and managers required to be fit and proper and comply with stricter regulations. Compliance will be enforced and non-compliance dealt with under the banks sanctioning mechanism.

Interestingly the commission may have has brought to an end a decade of protracted fruitless advocacy of the trade body ILCU which argued for retaining control of its resolution and stabilisation system. So obdurate was its advocacy that last year it demanded that regulation be separated from the central bank and switched from Finance to another department.

Having participated in a commission that has rubber stamped the central banks regulatory strategy will ILCU change its spots? How can it stand by its statements on national media earlier this month that no credit union was in financial difficulty after the publication of the report?

 

[CU Manager]

The ILCU initial response(ILCU President Jimmy Johnstone to al ILCU CU's):​

Initial Response to the Interim Report of the Commission on Credit Unions


“While the challenges faced by the credit union sector are significant, they are not insurmountable”.​

Commission on Credit Unions


Interim Report - October 2011​

I want to thank the members of the Commission and commend them for completing the first stage of their work within a very short timeframe. A tremendous amount of time and personal effort has gone into its production and I want to thank the Commission members for their contribution and commitment to the Credit Union Movement. I would also like to thank the Minister for Finance for the timely publication of this report.

The Commission has remained true to its terms of reference and I sincerely hope, as do the Minister and the Commission itself, that this interim report will significantly contribute to the necessary reform and development of the Irish credit union movement. That said, the Commission’s work is not complete. It will now proceed to turn its attention to crafting a strategy for the future development of the movement. As a matter of policy, the League will continue to seek appropriate and proportionate legislation for credit unions, separate and distinct from other financial service providers as this process of reform and development progresses.

That process has begun well agus, mar a deirtear, tús maith leath na hoibre. This report must be viewed in that context and we must now take time to examine and consider its recommendations and findings. The movement stakeholders must objectively view the report in its entirety and, in doing so, avoid focusing on any particular aspect in an attempt to bolster their own viewpoint. The time for defensive and protectionist positioning is past. We must face the reality of “What is”.

While many of the difficulties we now face were not of our movement’s making, we are all responsible for some of the shortcomings which are highlighted in the report. The only way we will overcome the challenges that we face is by working together. We must all play a part in successfully implementing the Commission’s recommendations. In short, my initial reaction to this report is “let us get on with it”. Let’s have the genuine consultation, dialogue and engagement that our movement deserves and let us ensure that the necessary reforms and developments now take place.

I would ask that the board of directors of every credit union study this report and consider its recommendations in a comprehensive and objective manner. The League Board will do likewise and revert in due course.

Ní neart go cur le chéile.​

 

[ajapale]

Several personalised and off topic posts removed.

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[kaplan]

ILCU objected to the strategic review process instigated by Minister Lenihan and run by the central bank in 2009/2010 (which came to a shuddering halt once the troika arrived) and lobbied FG for a commission. When established ILCU had only two seats on the 13 seat commission.

The internal communication published above is to be welcomed as it appears that the trade body has stood down its "defensive and protectionist positioning".

This saw it lobby against a statutory deposit guarantee for savers from 2003 until Sept 2008 when the Government was forced to extend the deposit guarantee scheme to credit union savers. It has objected to a statutory stabilisation system from 2003 to date and last year lobbied to have credit union regulation removed from the central bank.

It seems that after three years of denying the "What is" it is finally facing a reality that I and others have written of at length in many threads on this site.

 

[CUJimmy]

The ILCU appointed two staff to the commission. This meant that the movement volunteers were left unrepresented on the commission. Ilcu also made no submission to the commission. Wait for the backlash ...............

 

[Slim]

The ILCU appointed two staff to the commission. This meant that the movement volunteers were left unrepresented on the commission. Ilcu also made no submission to the commission. Wait for the backlash ...............

But isn't ILCU representative of the volunteers? The ILCU Board is elected at AGM annually. CUDA was also represented on the Commission. AGM in Killarney should be interesting next week.

 

[CUJimmy]

Well Killarney was as expected, the highly vocal minority, representing the traditional wing of the movement lambasted the commission report. The CEO of Ilcu and member of the commission done a "Pontius Pilate" on the report saying that he didnt agree with a parts of the report but had to accept the report in full. The board of the ILCU also proceeded with thier proposal to pass a resolution seeking additional funding from credit unions for its stabilisation fund, to enable it to bail out insolvent credit unions. Although the motion was approved there are a lot of Credit unions who will not pay and will face expulsion from the ILCU. In my opinion the leadership of this movement are totally out of touch with the mmovement and reality.

 

[Complainer]

In my opinion the leadership of this movement are totally out of touch with the mmovement and reality.

Doesn't the ILCU operate on a democratic basis? Member CUs can submit motions to be voted on by all members - right?