Fitness and Probity of Directors of Credit Unions

Quarehawk
Credit Unions now advertise for QFA’s , not through choice but necessity as their non-core business falls within the CPC obligating them to have qualified staff. But the skills aren’t just required at the selling end of the business. What’s missing is competence and skills at board and management level.

The Regulator both the RCU and its CEO have consistently hammered home on credit union governance. At one time the RCU referred to credit union directors as enthusiastic amateurs – of course he was roundly condemned by the ILCU.

The CEO, Pat Neary addressed the World Council in Dublin 2006, highlighting the challenges faced by Irish credit unions – he was attacked from the podium by the ILCU. International leaders were appalled and privately voiced their dismay at ILCU behaviour. The RCU has recently addressed governance once again and was attacked for not attacking the banks!

The Regulator is stuck, hamstrung by a legacy of self-regulation and political appeasement, bad laws and frustrated a lack of credit union reform and development. To many observers its approach amounts to “regulatory minimalism” as it doesn’t want to be caught holding the baby when a crisis hits – as it will. One recent media report spoke of a secret war behind the scenes between regulator and regulated. What we hear is subtle regulatory language versus credit unionist rhetoric of co-operative ethos and spirit.

The ILCU defence is that credit unions are “run by volunteers”. With close onto €14bn in household savings, 80% of which is held in the top 100 credit unions, the sector proposes a concentration of consumer savings far greater than any of the big banks. The largest Credit Unions have between €200-€300m in household savings of a local population living within a 10 mile radius. Equivalent concentrations are true of many other provincial towns. There are also cluster density within geographic areas.

Were these top 100 credit unions a branch banking network, the bank would be bigger than National Irish Bank in its market share of consumer savings and personal loans.

Most people don’t realise the size of operations and moreover the scale of risks requiring governance and management by capable people. If they did, the would rightly demand fitness and probity tests, greater transparency and far more robust regulations and prudential supervision – and of course proper deposit insurance.

But such is the oveall level governance and managerial competence that the future is one where it is highly likely a catastrophic regulatory event will trigger reforms as it has elsewhere most notably Australia in 1992.


Kaplan

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Kaplan,
Could you please expand on what happened in Australia in 1992?
Where would one find Pat Neary's speech to the WOCCU Conference in 2006?
 
Quarehawk

His speech is available on the IFSRA site under “News” section “Archive 2002-2007” - (28th July 2006). You have to scroll back as it’s not possible to directly link to the page. It should be read along with "Address by Brendan Logue to National Supervisors Forum" (3rd Nov 2007) & "Statement by Brendan Logue RCU to Joint Oireachtas Committee" (13th Sept 2006).


The Australian reforms came about principally from a catastrophic regulatory event, the failure of the Pyramid Building Society. This triggered government reforms of the mutual & co-operative sectors after which a stricter regulatory and supervisory regime was put in place but also one that provided the potential & flexibility for credit unions to expand and grow their operations. Regulation & Supervision became more "bank like" with a major emphasis on building reserves, risk weighted capital and providing for differing lower risk loan assets (mortgages) along with audit, disclosure, fitness & probity and relaxing the common bond type resrictions to competition.

Kaplan
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