Want to avoid credit union risk? Get rid of credit unions.

By Greg Allen, banking and finance consultant with GDA Consulting

Aug 3, 2010

Financial regulator Matthew Elderfield and Kieron Brennan, chief executive of the Irish League of Credit Unions: could getting rid of credit unions be at the back of the regulator’s mind? Credit unions will vanish from Ireland over the coming years. A familiar pattern will emerge of small credit unions transferring their business to bigger credit unions. This will continue until what is left is a small number of very large credit unions. These will eventually be sold to much larger international financial institutions until they no longer exist. History, they say, repeats itself. This is exactly what happened to the trustee savings banks.

This is going to come about because of one specific change introduced by the Registrar of Credit Unions in 2009. This requires credit unions to have a non-distributable regulatory reserve of 10% of total assets with effect from 1 October 2009. Currently, most credit unions can comply with this requirement, and because they can achieve the standard, it appears to be reasonable on the face of it.  . . . . . . . . . . . . . . . . . .

“The credit union movement is going to die slowly but not obviously. We will be safe from a credit union collapse because there won’t be any credit unions. This is the best risk avoidance of all.”

Read full article AccountingNet.ie


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