Address by Registrar of Credit Unions James O’Brien to the LIA Credit Union Awards

06 November 2012 Speech
Mr. President, Ladies and Gentlemen, I am delighted to be invited again this year to be part of the LIA Credit Union Awards Ceremony. It’s a real pleasure to see so many credit union volunteers and staff receiving their Award Designations here this evening – clearly demonstrating a positive affirmation of appetite for change.

Thank you Mr President for your best wishes in relation to my new role with the UAE Central Bank – I am looking forward to the challenge. My time as Registrar of Credit Unions has been a rewarding experience both personally and professionally and I will certainly miss the energy and enthusiasm of the people involved in all aspects of running credit unions. We can be proud of what we have achieved together. I believe that the publication of the Credit Union Bill 2012 is a pivotal moment in credit union evolutionary history. This Bill provides a framework for the movement to be re-shaped and develop – something that must happen if the sector is to remain viable into the future.

This is a time of significant change for the credit union sector. However, in any process of development change is required - and so, in this sense, the change now happening should be seen positively. The American inventor Charles Kettering is quoted as saying “The world hates change yet it is the only thing that has brought us progress”. It’s hard to disagree with this. For this reason the credit union sector must develop thought processes that align change with opportunity. In doing so a framework can be created in which prudent change can bring about prudent opportunities - opportunities that do not expose the credit union sector to undue risk.

There is no doubt that transition will always bring opportunity. Positive influence by credit union leaders can also play a major part in generating these future opportunities. We believe that prudent development built on sound governance fundamentals and business structures is key to a sustainable credit union sector. Those in the movement that are in a position to show leadership can play a big part in this development and be a strong positive voice in the process.

There is a new reality to running a credit union. Strict financial discipline, a relentless drive for cost efficiencies and a clear focus on strategy and strategic deliverables is now vital if the sector is to remain sustainable. The world in which credit unions operate has changed forever. In this new reality volunteers and staff must act quickly and get on with the business of sorting out their credit unions. This will require capability and competence. For the future, a strict governance culture embedded across the organisation will be a pre-requisite for credit union development. No more is it simply a matter of opening the credit union door and letting business take care of itself.

So how does business education fit into this new vision for how credit unions are run? A major focus in designing the new regulatory framework contained in the Credit Union Bill is to strengthen governance in credit unions individually and the sector overall. As you will be aware this is something we have been working towards for a number of years now. Our regulatory vision statement is ‘Strong Credit Unions in Safe Hands’. We see proper governance as being key to bringing about a financially stronger sustainable credit union sector which can continue to serve future generations of members.

Our supervisory approach is based on the identification, management and mitigation of risk. We see the biggest risk of all arising from people not knowing what they are doing – not understanding the risks they are taking - and in many of the problem cases we have come across this has clearly been the case. Conversely we have seen many credit union boards, in recognition of their limitations, opt not to take risks they did not fully understand – a decision that has stood them in good stead despite the challenging financial and economic environment they are operating in. These boards were able to differentiate between ‘what they knew’ and ‘what they didn’t’. While we have not carried out any analyses as to why this was the case I suspect it was due to a mixture of education and experience contained in those boards. It is vital therefore that education programmes in credit unions are designed to ensure that they are not solely qualification focussed. There is a lot to learn about running a credit union. Qualifications are a starting point. The ‘rubber hits the road’ when it is time for the proper (and prudent) application of knowledge gained through education and/or experience, in the day to day decision-making for credit union businesses.

We see education as being a key ingredient in the on-going development of a prudent approach to the management of risk to members savings in credit unions. Not so much education in the sense of how much is committed to memory, or how much one knows – but in the sense of being able to understand what ‘one doesn’t know’.

It is encouraging to hear that the LIA is committed to ensuring course material is relevant to the needs of the credit union sector. It is apparent that courses are under constant review and update – this is extremely important in supporting the building of and maintaining appropriate governance standards in the sector. We welcome the efforts of the LIA to provide tailored courses to build the competencies required to run credit union businesses. The support framework offered to students to support their studies is also to be commended.

Of course, it is important to realise that education alone will not be sufficient to ensure strong governance frameworks in credit unions. Culture also plays a big part. The level of leadership provided to embed a prudent culture of compliance and decision-making in an organisation is (always) all important. The credit union sector needs positive leadership to do this and all of you here today are in a position to provide input to that leadership. Each of you through the knowledge you have gained from your studies are now well positioned to play a leadership role in embedding a culture of good governance in your individual credit unions. I hope you will rise to this challenge. A prudent culture allied with appropriate education can be a major force in bringing about the appropriate governance framework to allow the sector develop at pace.

The commitment of volunteers and staff in credit unions is second to none and with this energy harnessed to bring about the changes necessary for future development I believe there can be a positive future for the sector within a new financial services landscape in Ireland.

So all that remains for me to say is ‘Congratulations’ to each and every one of you on your achievement. I hope you enjoy the rest of the evening. Well done! I wish you all the very best for the future.

Thank you for your attention.