Credit Unions & #GE16

Introduction

In the grand scheme of the broader financial services sector Credit Unions are relatively small fish. Even the combined assets of the 330 or so Credit Unions (€14.3bn) are dwarfed by the balance sheets of BOI (€130bn), AIB (€111bn) and PTSB (€36bn). That being said there is considerable potential within that combined asset base that could be built upon with a move in the right direction, and politicians are starting to pay some attention to this fact. In this post I’ll take a brief tour of some of the general election manifestos to see what, if anything, they are saying about Credit Unions.

Whilst it is unlikely that any government will interfere with the role of the Registrar of Credit Unions, there is a growing acceptance that the new regulatory framework may be throwing the baby out with the bath water so it will be interesting to see what way the political winds blow for Credit Unions after the 26th of February.

The 2016 Manifestos

Fine Gael

The outgoing lead partner in the coalition has made the promise of “putting consumers at the heart of [their] plan for the banking sector over the next 5 years.” In relation to Credit Unions they make the following specific commitments:

Support the rollout and extension of the Personal Microcredit Scheme, which is providing simple microloans to members and helping to combat the use of moneylenders
Assist Credit Unions in making successful applications to retain members’ savings in excess of €100,000 (CP88), recognising the independence of the Registrar of Credit Unions
Ask the Central Bank of Ireland to instigate a review of the continued appropriateness of the savings limit within a year of the formation of the next government
Work with the Registrar of Credit Unions at the Central Bank to gradually lift current lending restrictions as appropriate, including for housing
Support Credit Unions’ move towards more electronic and online services, including the rollout of debit cards and enhanced online banking services
Ask the Credit Union Advisory Committee (CUAC) to conduct a review, and report by the end of June 2016, on the implementation of the recommendations outlined in the Report of the Commission on Credit Unions.

There’s some interesting things there as well as some things that are clearly the Registry’s job. It will be interesting to see what form the “support” for the move towards debit cards and enhanced online services will take, but it’s positive to see a commitment there nonetheless, especially given the shockingly slow development of services within the sector.

Labour

The junior party in the coalition devotes nearly a full page of their manifesto to Credit Unions, without offering much in terms of concrete commitments.

Labour’s first point centres on encouraging “Credit Unions and post offices to engage and develop strong linkages”, a link up floated by the Kerr Report published last month. Whether this is a runner or not remains to be seen but it’s certainly something worth exploring, and could provide a tonic for rural communities stripped of services over the past five or six years.

Other than the mooted linkup with post offices Labour “recognises the need for Credit Unions to develop new products and services in order to grow their income and … are committed to working with Credit Unions to diversify their business and grow sustainably.” The also note that “some consolidation of Credit Unions is inevitable” and the will “continue to support mergers, where necessary”.

Fianna Fáil

Fianna Fáil appear to have the most comprehensive and thought-out policy position in relation to the Credit Union Movement (a difficult thing for a lapsed Blueshirt to admit!)

The party of former perpetual government has a vision for Credit Unions in helping SMEs and encouraging balanced regional development. Their plan is to create a full state enterprise bank by reforming the role of the Strategic Banking Corporation of Ireland. In addition to reforming the role of the SBCI they envisage that the “SBCI will work with Credit Unions to help provide finance to SMEs. Credit Unions will be able to put a portion of their €8bn savings fund into an SME lending.” It’s not a bad idea and could be something worth visiting especially if it could be achieved by legislative intervention to allow it as an investment opportunity for Credit Unions.

Fianna Fáil also aim to boost Credit Unions and protect the vulnerable from predatory lending through the restoration of discretion in lending small amounts, something that will be music to the ears of compliance-wary managers, loan officers and credit committees the length and breadth of the country.

They would impose increased regulation on Moneylenders, enhance the role of the CUAC, remove the €100,000 savings cap and, most interestingly, would introduce tiered regulation for the sector.

The party also has a plan to develop Credit Union mortgage lending which could facilitate up to €4bn in lending or 20,000 mortgages. Furthermore, they wish to develop a National Home Building Bond to address the housing supply issue in high-demand areas, part of which would include inviting the Irish League of Credit Unions to co-invest in the project.

Finally, the party would facilitate Credit Unions in financing social housing and tapping into the billions of unlent reserves available within the sector.

The detail in the Fianna Fáil manifesto has the ILCU’s fingerprints all over it with the party appearing particularly receptive to the League’s extensive lobbying effort, which they should be commended for. (Check out the League’s Canvass Card here.

Sinn Féin

The party riding high in the polls is committing to carrying “out a review of Credit Union regulations with the aim of reducing the red tape holding back individual Credit Unions and the wider movement from contributing more to our economy.” This review would include consideration of lending restrictions, savings caps and restrictions on the types of investments and services Credit Unions can offer, including what Credit Unions can do to help develop small businesses.

RENUA Ireland

RENUA list empowering Credit Unions to lend to small SMEs as one of 4 priorities for the financial services sector.

“RENUA Ireland believes that the potential of Credit Unions to assist in tackling many of our national challenges is immense. At the moment the Credit Unions are prohibited from engaging in lending to small local enterprises. They are also restricted in how they can invest their members’ deposits. We believe there is a role for Credit Unions to invest in small business and to create a fund for social housing. Irish Credit Unions have €8 billion on deposit. Prudent investment of these funds could make an enormous contribution to the Irish economy and to Irish life.”

Social Democrats

The Social Democrats manifesto covers 2016 to 2026 and they propose to create a “community banking sector” invoking a variation the post office linkup proposal from the Kerr report. Their manifesto incorrectly states that Ireland has around 380 Credit Unions – a reference to the heady old pre-ReBo days – but they do pitch for something different. Their proposal centres around enhanced services for Credit Unions, including:

Provision of full current accounts for personal and small business banking, including debit cards that can be used on the full national and international ATM network;
Provision of mortgage lending, with expertise and financial aggregation of risk provided at a county and/or regional basis;
Provision of online banking and associated services including electronic payments;
Support for on-going development of lending expertise, in particular with regard to mortgages and business lending;
Support for all corporate governance changes required to ensure compliant oversight of new financial activity;
Increased savings limit beyond €100k for credit union customers;
Wider investment options for credit union deposits than current options (limited mainly to government bonds, bank bonds and cash deposits);
Feasibility study to see if Credit Unions could become conduits for small savings loans underwritten by the Strategic Banking Corporation of Ireland, as per the model currently used in the retail banks.

The Others

The Green Party is proposing to introduce a public banking model which can provide lending for small and medium enterprises from the use of deposits raised in a region in the same region. The manifesto makes no mention of Credit Unions or what would become of them after the introduction of these ‘Public Banks’.

People Before Profit – The party’s manifesto has no reference to Credit Unions, which is not surprising given it only runs to 15 or so pages. Indeed its only mention of financial institutions at all is the “writing down of bankers debt”.

Anti Austerity Alliance – You learn something new every day but apparently the AAA have merged with PBP! I don’t keep up with the politics of the extreme left so I’m not wholly sure if they are fully merged but they do appear to have some sort of arrangement. Either way, the AAA still have a different website and no policy on Credit Unions.

Final Comment

There’s a number of positions being taken by the parties in relation to the sector, ranging from no position at all to the promise of relaxing regulation with everything in between. I’d be interested to hear the thoughts of fellow Credit Union professionals and volunteers regarding the election and what we should or could reasonably expect from the next Government, whatever its make-up.