The President of the ILCU Mark Bailey called for an Independent Credit Union Regulator to be established.  In an address to the Joint Oireachtas Committee on Economic Regulatory Affairs, Mr Bailey outlined the serious concerns surrounding the future regulation of credit unions in Ireland.

Speaking at today’s meeting Mr Bailey said “Our reason for seeking to address this Committee today is to highlight the very deeply held concerns of our members regarding new regulatory structures that are being proposed to deal with failures in banking regulation.  In particular we are concerned that these new structures will adopt a one size fits all approach. The position and perspective of credit unions as the largest movement of community based volunteers in the State needs to be recognised and addressed in the months ahead in the context of this debate

Generally, the regulatory structure for credit unions has worked effectively.  It has been said by some volunteers in the credit union movement that the approach adopted by the Registrar has, at times, been over zealous and too intense without taking due consideration of the voluntary and community based ethos of credit unions. Others point to the contrast between the strong position of credit unions subject to such regulation as against the banks, which have clearly been subject to a lighter touch of regulation and have needed direct support from the Exchequer through recapitalisation or nationalisation. 

The simple fact remains, that despite an extremely tough climate last year, with major challenges for individual credit unions and their members, credit unions remain robust, stable and prudentially sound. Regrettably the same cannot be said for many of our main banks and building societies – much to our collective cost.

An Independent Credit Union Regulator

There is an argument that credit unions, as voluntary based community or vocational organisations providing financial services only to members, should be regulated in a structure outside the Central Bank Commission. 

In a number of other jurisdictions including the United States, the unique and particular position of Credit Unions as community based financial co-operatives has been recognised through the formal establishment of a regulatory structure that is separate and distinct from banks and building societies.  This makes sense – it allows the Financial Regulator to concentrate on regulating the activities and behaviour of those who have presented problems.  In seeking this, we are not looking for less regulation but for regulation to take place on a basis which recognises the difference between banks, building societies and credit unions and which ultimately allows the Regulator of banks and building societies to focus on the areas where problems have arisen in recent years.  It would be a travesty if the regulatory failures with the banking sector resulted in regulatory structures for credit unions within the new Central Bank Commission which were disproportionate, excessive and failed to take account of credit unions’ unique and special role

In this context, there is a consensus emerging from the credit union movement, as endorsed by the ILCU Board at a meeting on 16 January last, that the regulation of credit unions in a manner which secures strong prudential regulation, but that recognises the ethos, social and community focus of credit unions will best be secured through the establishment of an Independent Credit Union Regulator.

Inappropriate regulatory structures for credit unions have the potential to do serious damage to our movement.  All too often the consideration of regulatory structures is a matter that is reserved to experts or consultants. We welcome the fact that a Committee of the Houses, comprised of public representatives, has a remit to review regulatory structures.  Such a review has never been more critical than now, in light of the clear failure of existing regulatory structures as they apply to banks and building societies in the State&rdquo

Mr Bailey concluded “As organisations rooted in the communities that they serve, the recession has impacted on credit unions and credit union members. Some credit unions have faced challenges over the last number of difficult years but we are confident that they can endure and work with their members, the ILCU and the Registrar to continue their crucial role in the provision of financial services”.