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Days of solo Credit Union numbered

Tuesday, February 25 16:10:05

The days of the small, proud to be local, stand-alone credit union are numbered, a conference hosted today by ACCA Ireland (Association of Chartered Certified Accountants) heard today.

Concerns were expressed that current lending restrictions applied to the sector could play into the hands of unregulated money lenders.

Acknowledging that mergers can and are happening, the conference focused on the options for credit unions to merge, be subsumed into a bigger credit union, or to stand-alone.

Commenting, Aidan Clifford, Technical Director of ACCA Ireland said it is a tribute to the credit union sector that they have come through, arguably the world's worst financial crises, relatively unscathed compared to how our banks fared.

"The crises, however has focused the Regulator's attention and brought about new legislation and prudential regulations, which have numbered the days of the small, proud to be local, stand alone credit unions. The merging of credit unions is the only way forward."

He added that good lending will provide the basis for a secure future for credit unions, but 50pc of all credit unions are currently under lending restrictions from the central bank which make it a very difficult environment for them to operate in.

"Many cannot even, for example, offer new car loans - no matter how good the credit risk of the borrower. As Credit union loans are 'secured' loans under personal insolvency law, many credit unions have set aside reserves to cover bad debts of sometimes up to 30pc of their loan book. There is debate at the moment as to how excessive the level of bad debt provisioning in the credit union sector is and that restrictions in lending could play directly into the hands of unregulated moneylenders. Credit unions need to act now to ensure they are fit for purpose".