Date
08 Apr 2024Category
Financial ServicesIntroduction
The 2023 Act introduces a whole variety of options and opportunities for credit unions in terms of greater potential collaboration between individual credit unions; greater scope for lending to SMEs; access to mutual funding and lending opportunities; and more opportunities for streamlined division of responsibilities between Management and Boards.
Background
As is well reflected in the Central Bank Credit Union Handbook, the regulation of credit unions by the Central Bank of Ireland has undergone wholesale revision since 2010. The principal act for the regulation of credit unions is set out in the Credit Union Act 1997 as revised in 2012 in terms of prudential supervision, and as further refined in terms of regulatory requirements in 2016.
Role of Credit Unions and Retail Banking
Credit unions play an important role in the provision of consumer credit and are making significant inroads in the current account, mortgages, and SME segments of the market and coupled with their collectively strong levels of capital and deposit bases, they have a major role in the provision of retail banking products and services going forward.
The 2023 Act
The 2023 Act includes extensive provisions for credit unions to operate in a more liberal way than in the past. The principal provisions include:
Corporate Credit Unions
The 2023 Act provides for the creation of corporate credit unions in which groups of credit unions may invest as shareholder members, thereby enabling credit unions to collaborate on pooling resources and providing access to greater potential funding opportunities, with lending restricted to the member credit unions.
Revisions to Corporate Governance
Two key provisions include the ability for the appointment of a credit union manager to be appointed to the board of directors by the board rather than by election at a general meeting of members and secondly the reduction in the minimum number of board meetings in an annual period to be reduced from ten to six. However, a manager cannot sit on the nomination committee of the credit unions and membership is restricted to board members who have been co-opted or elected.
The 2023 Act also permits a reduction in the number of board oversight committee meetings and removes the requirement for the board oversight committee to sign the audited annual accounts, and, furthermore, extends the permitted period of review of policies and procedures from one to three years.
Provision of Services to members of other Credit Unions
The 2023 Act enables further collaboration between credit unions by allowing all credit unions to refer members to other credit unions to avail of a service that the original credit union does not provide, such as e.g., current account facilities etc.
Participation in Loans
The 2023 Act enables collaboration between credit unions to participate in loans to a member of another credit union, thereby enabling risk sharing between credit unions and the potential to offer larger loans to members.
Lending to SMEs
The 2023 Act enhances the possibility for credit unions to make loans to SMEs by enabling credit unions to include corporate bodies as members of a credit union, with the same rights and obligations as a natural person, provided that the majority of the members of the corporate member are eligible to join the credit union and the corporate entity meets the requirements of the common bond.
Azets Ireland
Following the recent merger between Azets Ireland and PKF O’Connor Leddy & Holmes Limited in Ireland, Azets Ireland is firm of chartered accountants with more than 240 colleagues in Dublin, Enniscorthy, and Waterford and is also part of a group of 7,500 colleagues internationally. In the recent past the firm has established a substantial Financial Services team led by Darren Shipp.
Azets Ireland and Credit Unions
Our Financial Services Team combine expertise in accountancy, financial reporting, strategic advisory services and compliance and financial reporting services.
