I see very little point in mergers. They are just distractions from the main problems which they need to address.
But it's not Rebo's fault. The Credit Unions do not want to change their ways at all.
Brendan
@wbbs I agree with the sentiment. The Central Bank has gone insane. They have even redefined 'insolvency' in the recent Berehaven case.
The Berehaven loan book dropped like a lead balloon due to the restrictions placed upon it by the Central Bank
While the Central Bank's restrictions on many credit unions are crasy, I don't think that this is fair.
In general, the demand for CU's services is falling rapidly making them less viable, but specifically, Berehaven was the primary author of its own misfortunes. From the CB report
[FONT="]28[/FONT][FONT="]. Those reviews have highlighted that the BCU Board has failed to maintain adequate internal controls and governance. The common issues and concerns identified by[/FONT]
[FONT="]independent third parties are as follows:[/FONT]
[FONT="]L[/FONT][FONT="]ending practices[/FONT]
· [FONT="]Inadequate assessment of borrower ability to repay[/FONT]
· [FONT="]Inadequately documented credit assessment of borrower ability to repay[/FONT]
· [FONT="]Credit concentration risk – high level of lending to a low quantum of borrowers[/FONT]
· [FONT="]L[/FONT][FONT="]ending to members in arrears on their existing borrowings[/FONT]
· [FONT="]Irregular practices concerning loans to officers of BCU including in respect of loan approval[/FONT]
· [FONT="]Inadequate anti money laundering procedures including a failure to establish the identity of the borrower and the address of the borrower[/FONT]
[FONT="]S[/FONT][FONT="]p[/FONT][FONT="]ecific weaknesses in respect of financial reporting and controls[/FONT]
· [FONT="]BCU’s general ledger is manually prepared and is paper based[/FONT]
· [FONT="]Weaknesses in the preparation of management accounts[/FONT]
· [FONT="]N[/FONT][FONT="]o documented policies and procedures relating to the internal financial reporting control environment[/FONT]
· [FONT="]N[/FONT][FONT="]o individuals suitably qualified in accounting were involved in the preparation of monthly management accounts[/FONT]
· [FONT="]N[/FONT][FONT="]o fixed asset register[/FONT]
· [FONT="]H[/FONT][FONT="]igh risk bank and cash control practices[/FONT]
Hi CU Manager
Why do you think the Central Bank singled out Berehaven?
If they were doing this for every credit union in the country, I would accept your conspiracy theory.
But they had serious concerns about just this credit union which appears to have made a lot more bad loans than most other credit unions.
Brendan
The percentage of bad loans would not be as high if the CU was allowed to lend normally - this is just basic arithmetic
Hi CU Manager
Around half of Credit Unions are not subject to special lending restrictions. Hasn't their lending fallen dramatically as well? .
The only way the credit union could have generated enough capital was to continue as a going concern and earn income from a functioning loanbook. The Central Bank prevented this from happening. Kinder regulatory actions could have brought about operational changes - its not necessarily true that the absolute losses would have increased - although that is what the Central Bank wish you to thinkThe Central Bank was rightly worried that there was not enough capital to fund the losses on the existing loans. Allowing Berehaven to make further loans, would increase the absolute losses, even if it reduced the percentage.
As I said, the CU restrictions are excessive. But the Credit Unions are the authors of their own misfortune.
So what would you have done if you were the regulator facing high bad loans in a Credit Union which had ignored your directions on a few occasions?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?