Registrar of Credit Unions address to the National Supervisors Forum

• Effective governance crucial as credit unions seek to expand their business models.
• When defining future strategy, credit unions must have a well-developed risk appetite.
• Business model change capacity varies between individual credit unions, in line with strategic risk appetite and financial and operational capability.

Registrar of Credit Unions, Patrick Casey, addressed the National Supervisors Forum Annual Conference on 3 November in Westport, Mayo. His address focused on the importance of effective governance at a time when credit unions are seeking to expand their business models. Attendees were drawn from Board Oversight Committees of credit unions, comprising individuals appointed by members to oversee and assess credit union board performance in terms of governance and operational requirements as set out in legislation.

Mr. Casey emphasised four main areas in his address:

• Credit unions face challenges that are commercial in nature, and responses need to be commercially targeted, and grounded in the credit union’s core foundations of governance, risk management and operational capability.
• As credit unions seek to evolve from a traditional savings and loans offering to an expanded range of products and services, success requires clarity regarding both strategy and risk appetite.
• Sound governance and effective systems of control are essential foundations required both to oversee and manage current activities, and to underpin the development of new activities. 
• Importance of credit unions boards conducting robust due diligence and demonstrating realisable benefits before participation in collaborative or shared service opportunities.

Mr. Casey also referenced the Central Bank’s recent work on culture in financial firms. He noted that the Central Bank expects firms to comply not only with its regulations and codes, but also that the people who lead the firms set the right tone-from-the-top, and create and embed a consumer focus in structures, processes and systems. He noted that this focus is strongly aligned to the member-centric ethos of credit unions.

In his remarks Mr. Casey commented:

“Credit unions face challenges that are commercial in nature, and responses need to be both commercially targeted and grounded in a credit union’s core foundations of governance, risk management and operational capability.

Business model growth is about seeking to ensure that the credit union has a sustainable and vibrant model, with prudent growth delivered across a broader set of income streams. For some credit unions, this may posit a strong future. For others the picture will be more challenging. In either case, analysis must support conscious strategic decision-making on the part of the credit union board, and articulate next steps.”

Note

• There are 264 active credit unions in Ireland.
• Credit unions hold over €17 billion in assets. 
• 53 of the largest credit unions (with total assets in excess of €100 million) account for 55 per cent of sector assets and 50 per cent of sector members. 130 credit unions with total assets of ≤€40 million account for 16 per cent of sector assets and 19 per cent of sector members.
• The Central Bank published a consultation paper in relation to long term lending by credit unions on 24 October 2018.