All Posts By

dawn.kennedy@cuda.ie

Aug 08 2022

Credit Unions – The Member-Owned Alternative

By News

As I look out the window, I see a spider working diligently weaving a web – busily performing its modus operandi for subsistence. I can’t help drawing the analogy to the headlines dominating the business pages of the media in recent weeks, which highlight how domestic banks will see significant increases in their profits as Central Banks increase interest rates. The source of these profits will be the unwitting consumer, a bit like the unsuspecting prey of the spider. And banks, like the spider, do what’s inherent in their DNA and in the case of banks it’s to maximise profit.

Ireland faces multiple complex and overlapping pressures including economic shock, climate change, housing, wealth inequality and the growing pension challenge. We can add facing into a winter of increased inflation where the cost of living, energy in particular, is soaring. This is a consequence of sanctions having to be imposed following atrocities committed by the Russian army and their inhuman siege of parts of Ukraine.

There is no doubt that people here in Ireland have changing financial requirements arising from trying to cope with the impact of these events. As two banks exit our national market, some consumers are even required to find a new provider. Reducing the level of competition is likely to lead to even less ‘positive’ product and service innovation as witnessed with the intent of a remaining bank to withdraw cash services, and the reversal of that decision is now likely to see increased charges to keep the promise of maintain branches and related services.

One provider that can help people is the credit union. Credit unions are member-owned, not- for-profit financial intermediaries. Their members have the dual role of owners of the credit union and consumers of the products and services it provides. Membership has grown consistently and the credit union brand remains the most trusted in Ireland as they continue to deliver the best consumer experience in Ireland.

Credit Unions have significantly modernised in the past decade – their structure, legal and regulatory status, product offerings, and service delivery methods have advanced considerably. Members can still access the traditional set of personal loans and savings, and now they have current accounts, ‘one stop shop’ retrofit loans, mortgages, revolving credit, debit cards, community loans, agri loans and loans for small businesses. These are accessible face to face, over the phone or via online facilities.

Staff in credit unions are highly trained as well as being renowned for their helpful approach to all members. They live the guiding principle of “Not for profit, not for charity, but for service” which has remained constant since the founding of credit unions.

What does that mean for people, small businesses and communities in Ireland?

  1. First and foremost is ownership. A credit union is owned by its members. In addition to being a non-profit, credit union operations are set up to benefit you as a member.
  2. Second is the focus on the financial well-being of their Credit Unions are not built to sell you products. They are built to help you succeed financially.
  3. Thirdly, is the availability of credit union Credit Unions were built to help you in good times and difficult times. Whether you have the opportunity to improve your lifestyle or unfortunately face an unexpected downturn in circumstances, such as impact of rapid inflation, you can visit, call or deal on-line with your credit union to discuss ways to find the right solution for you.

At CUDA we do believe credit unions present an underexploited opportunity and could play an even more supportive and leading role in addressing many of the challenges faced by Irish people. There is a genuine desire to support local communities by providing access to products, services, guidance, and advice. In turn there needs to be legislation and regulation that is supportive of such development.

As part of the Programme for Government, the Minister of State at the Department of Finance, Sean Fleming TD, and his department have worked with the sector to identify enhancements to the Credit Union Act 1997 [as amended] that will contribute to enabling credit unions tap into this opportunity. It’s a great start, as the promised new legislation will help credit unions further develop by allowing them to work more closely together, in a manner that they can’t legally do today. Under the new proposed legislation, credit unions will be able to introduce business to each other and co-lend to allow them pool expertise and capital. This in turn will enable them to support an even greater number of members through good times and tough times.

The Central Bank, through the Registrar of Credit Unions, is equally crucial for this needed reform, by ensuring that the regulations required to enable the legislative changes are put in place immediately. Last month the Basel Committee on Banking Supervision published their ‘High-level considerations on proportionality’. It is this type of action we need for credit unions in Ireland to guarantee a level playing field exists, in particular that appropriate and proportionate levels are set for liquidity, for capital requirements, and greater flexibility permitted to lend in the various categories – including fostering the ability to lend more to local businesses, farmers, local clubs and community projects.

Such enhancements will increase credit unions confidence and encourage even greater collaboration as they strive to act nationally and deliver locally.

If Ireland is serious about having a competitive banking landscape, one that is underpinned by Government policy that ensures financial services are for everyone in our society and operated in a manner that fosters public and social interests, then it is essential that these changes urgently are implemented.

Critically, credit unions have a much broader remit than banks – credit unions deliver key banking and financial services to people for a social as well an economic purpose. Unlike the spider and the bank who seek to maximise their returns, credit unions exist to optimise benefits for their members.

Contact your local credit union to experience how your needs and expectations can be met.

 

Kevin Johnson

CEO, CUDA

Mar 10 2022

Credit Union bodies welcome engagement with Minister Fleming on proposals contained in Department of Finance Review of Credit Union Policy Framework

By News

The four credit union representative bodies – CUDA, CUMA, ILCU and NSF – met with Minister with responsibility for Credit Unions Seán Fleming and officials from the Department of Finance today, Thursday 10th March. At the meeting the Minister outlined a list of proposals contained in his Review of the Credit Union Policy Framework.

The proposals were summarised under five key objectives;

  • Objective 1: Recognition of Role of Credit Unions
  • Objective 2: Supporting Investment in Collaboration
  • Objective 3: Supporting Governance
  • Objective 4: Improving Member Services
  • Objective 5: Transparency of Regulatory Engagement

Minister Fleming spoke about the importance of credit unions growing their loan books and proposed a number of measures to assist credit unions in this regard. In particular, he proposed bringing forward legislation to enable credit unions to invest more easily in Credit Union Service Organisations (CUSOs). This would allow credit unions to pool their resources in delivering new loan products to their members such as mortgages and small business loans.  They will also be enabled to establish Corporate Credit Unions to facilitate mechanisms such as a central liquidity system.

The Minister also proposed a number of measures to allow credit unions to introduce members to another credit union where the referring credit union was unable to provide a certain loan product or service. He also proposed legislative change to allow credit unions to share a larger loan between them.

In relation to Governance, Minister Fleming recognised the important role volunteers play within credit unions, and has proposed that this be included in legislation. Further proposals would reduce the work load on volunteer Directors and Board Oversight Committees in the future.

Also included in the measures outlined by the Minister were proposals aimed at making regulatory engagement with credit unions more transparent through the establishment of a Service Level Agreement (SLA) between credit unions and the Central Bank.

Responding to the Minister’s proposals, the four representative bodies welcomed the opportunities for lending for credit unions. However, there was general consensus that the proposals do not go far enough in addressing the key area of regulatory engagement. They recommend strengthened formalised structures that would include the four bodies, the Central Bank and the Department of Finance. This key infrastructure would serve to identify existing barriers to lending and prevent future impediments to progress and service to members and communities. The bodies believe that further engagement in this area is needed.

Feb 08 2022

CUDA Welcomes Government Announcement on Home Energy Upgrades

By News

Welcoming the announcement by Government today, Tuesday 8th February, in relation to Home Energy Upgrades,  Kevin Johnson, CUDA (Credit Union Development Association) said:

“This is a fantastic development for the homeowner and not ahead of time. The grants are designed to support “one stop shops” for homeowners, which is exactly what is needed. CUDA along with its partner Retrofit Energy Ireland (‘REIL’) were first to introduce this grant format to the retrofit market back in 2019, and the high demand from homeowners was immediately evident.

The grant, coupled with the access to finance, the savings that will be made, and the provision of retrofit experts all in one place takes the concern and reticence away from homeowners who are keen to make their home more energy efficient.

We are glad to see the Government are taking a long-term approach to this, with a commitment to fund the schemes over the next decade – this is something we have been campaigning for several years now. ”

Pro Energy Home Scheme was piloted by CUDA in 2019

“From dealing with members, credit unions have become increasingly conscious that many struggle to improve the energy rating of their home and successfully apply for the available grants. It became abundantly apparent that a simple end to end service model was badly needed. The ProEnergy Homes Scheme was piloted by CUDA in 2019, and rolled out on a limited basis during that summer. It was quickly oversubscribed. Demand from credit union members through the initial 25 participating credit unions generated over 1,100 enquiries from credit union members over a short space of time.

The initiative took all the “leg-work” away from the homeowner. All they had to do was fill out an application form, after which REIL will conduct an assessment on their property and present them with a report. As the trusted provider of financial services in communities throughout Ireland, credit unions are uniquely positioned to support the delivery of a one-stop-shop model for home energy retrofits. Credit unions have advanced tens of thousands of members with home improvement finance over the past year and increasingly, achieving a warmer and more efficient home is top of the agenda for our members. ”

Further information on the ProEnergy Homes Scheme can be found here

 

 

Jan 19 2022

Central Bank Consultation – Application of Minimum Competency Rules to Credit Unions

By News

The Central Bank of Ireland has today (19 January 2022) commenced a public consultation on the application of the Minimum Competency Code 2017 and the Minimum Competency Regulations 2017 to credit union core services.

Commenting on the consultation, Kevin Johnson CEO of CUDA (Credit Union Development Association), stated ‘Credit unions have fully embraced the process of business innovation as evidenced by the fact that two-thirds of credit union staff now hold CUA and/or QFA  (Credit Union Advisor, Qualified Financial Advisor).

Many people not familiar with the sector may be surprised by the level of change that has occurred across credit unions with increased digital access, a wider range of lending products including mortgages and small business loans right through to special services like the end-to-end home retrofit scheme which has proven so popular.

Credit unions are still the recognised as the most trusted brand in the country and this is a direct consequence of how they treat people – with compassion and understanding.

During 2021, CUDA’s own Credit Union Director Programme focused on supporting directors across the country to develop key skills to better understand today’s more complex banking world and to enable them to deliver the most appropriate products and services to their members.’

Dec 14 2021

Central Bank of Ireland’s Update on Financial Condition of the Credit Union Sector

By News

The Central Bank today (14 December) published its eighth edition of the Financial Conditions of Credit Unions Report. The report provides an update on the financial performance and position of credit unions, to inform credit unions and provide input for boards as they undertake their own strategic analysis and decision-making.

Commenting on the Central Bank of Ireland’s update on the financial condition of the Credit Union sector, Kevin Johnson CEO of CUDA (Credit Union Development Association), stated

“As seen in the report credit unions have the funds and the market reach, and we are delighted to see the breadth of services now available from many of them. The credit union movement could play a more active role, within their respective communities, in supporting housing association ownership, home ownership and retrofitting through sustainable and prudent lending, particularly as banks continue to reduce their presence in local towns and villages across the country. While credit unions have invested heavily in their digital capabilities in recent years to meet the convenience needs of many consumers, they have not abandoned those, of all ages, that prefer the face-to-face customer experience, whether it’s a simply transaction or a complex query.

The sector can only achieve its potential though continuing with their business model change, and this has to be enabled by an appropriate legislative and regulatory framework. Given the right structure, this could increase from current level of €5.25bn to €10.5bn.  We are constructively engaged in the Government Policy Review process and look forward to amended legislation that will enable all credit unions and their members prosper.”

Oct 19 2021

CXi Report – Credit Unions win for the 7th Year in a Row

By News

Following the announcement of Credit Unions winning for the 7th year in a row, Kevin Johnson, CEO of the Credit Union Development Association, commented…

‘As banks continue to reduce their presence in local towns and villages across the country, credit unions are winning both the hearts and heads of consumers who consistently appreciate and trust the credit union brand and are now moving their accounts and borrowing needs across in increasing numbers as banks branches close. Credit unions have been loyal to their communities for years and that loyalty is now paying off.

While credit unions have invested heavily in their digital capabilities in recent years to meet the convenience needs of many consumers, they have not abandoned those, of all ages, that prefer the face-to-face customer experience, whether it’s a simply transaction or a complex query.’

Oct 10 2021

BoI branch closure decision may see consumers move to Credit Unions in many Irish communities

By News

Commenting on the Bank of Ireland branch closures, Kevin Johnson CEO of CUDA (Credit Union Development Association),

“Friday’s closures will be felt by consumers in up to 80 towns and villages throughout the country. While there is undoubtedly a move towards a more digital offering in the financial services sector, there are still a significant cohort of people who are not ready to make that change. The migration of banks to self-service branches has been a difficult transition for many people – particularly older customers, many of whom still favour face to face interaction. However, today has taken this migration one step further, with people in the affected locations no longer being given even a self-service option.

While Credit Unions have made great strides in terms of digital developments, the community ethos means than maintaining a high-profile local community presence is integral for the movement. As with Ulster Bank’s planned exit, we believe the announcement today will drive more and more people across the country to becoming members of their local Credit Union so that they can avail of traditional banking through both digital and face to face means, a pattern we’ve seen in other countries including Canada and the USA.”

 

Sep 29 2021

Transfers of Engagements:  A ‘Learning’ Model – CUDA & CU CEO Forum

By News

This paper is the product of a joint initiative between the Credit Union Development Association (CUDA) and the Credit Union CEO Forum. The paper offers unique insight to the lessons that emerge during the transfer of engagements process from the perspective of three stakeholder groups, namely the ‘Board of Directors & CEO’, ‘Regulator’ and ‘Members’. These insights are gathered from published research, the authors’ experiences and their conversations with CEOs who have participated in multiple transfers of engagements.

Method

Twenty-six transfer of engagements lessons are documented. A majority of these lessons are acquired by the ‘Board of Directors and the CEO’, next by the ‘Regulator’ and last by ‘Members’. This is reflective of the effort contributed by the respective parties and the proportionality of responsibility they have in the transfer of engagements process.

A ‘learning model’ is constructed to guide the creation of ‘strategic’ transfers of engagements. The imperative that emerges is that the Board of Directors and CEO (of transferee Credit Unions) have a vision and purpose of what they seek to achieve from a transfer of engagements for their members. Critical to this is an understanding of what members really value.

Recommendations

  • A more streamlined and less costly transfer process should be put in place by the Regulator, particularly where the transferor is small in asset size and the transferee has a breadth of transfer experience.
  • The Regulator should introduce a risk categorisation of Credit Unions, similar to the CAMEL grading mechanism, this would create a greater understanding of each Credit Union’s strengths and weaknesses at the outset of transfer of engagements discussions.
  • Member Resolution for the transfer of engagements should occur prior to Credit Unions embarking on the lengthy and costly due diligence, business planning and integration planning phases of the transfer process.
  • A significant exposure for transferee Credit Unions exist during the period from completion of the due diligence to the completion of the legal and regulatory process. As a solution, the authors suggest the implementation of a process whereby the transferee Credit Union has approval input in situations where such exposures could potentially occur, for example via a Heads of Agreement mechanism.
  • The Regulator should commence a review of loan category limits. Future transfers are likely to create Credit Unions of significant scale whose business model could be hampered by existing lending limit.

The Paper can be downloaded here.

CUDA’s Standing Orders Podcast series is specially designed to inform and support member credit unions.   In this episode, Peter is joined by Donal McKillop, Professor of Financial Services at Queen’s University Belfast, and Chair of the Credit Union CEO Forum, and Kevin Johnson, CEO of CUDA.

They talk about the experience of mergers across the sector and the structural options going forward. Donal and Kevin, with the assistance of others in the sector, have researched and analysed the successes and learnings of mergers over the last five years and have recently produced a paper on the subject titled, ‘Transfers of Engagements: A ‘Learning’ Model’.

Standing Orders Podcast can be streamed directly from CUDA’s website at the link here or is available on all the usual podcast channels including Apple, Spotify and Google Podcasts, where you can subscribe to get notified when new episodes become available.

 

Sep 27 2021

Credit Union Sector Levy Regulations 2021

By News

The Minister of State, Sean Fleming T.D today, 27th September 2021, issued a press release on the Credit Union Levies for 2021. Commenting on this Kevin Johnson, CEO of the Credit Union Development Association, stated:

We note that the Minister has decided to continue with the levies for Resolution and for Stabilisation at the previous years levels.  It is disappointing that the Minister deems it appropriate to continue to charge a levy for stabilisation as no financial assistance has been provided to credit unions under the Stabilisation Scheme to date and no applications for such support have been made by a credit union.

While CUDA continues to support the purpose of a stabilisation fund, we believe the fund has reached an optimum size and therefore the Stabilisation Fund Levy should be set at 0%.

Sep 15 2021

Credit Unions and CUDA back New Fund to deliver 10,000 new homes

By News

CUDA and Initiative Ireland announce approval of new Fund, which aims to lend €600m to Approved Housing Bodies, to support delivery of 10,000 new homes over 10 years

Up to 100 Credit Unions across the country are expected to participate in the first Credit Union backed house-building fund which is anticipated to deliver 10,000 units over the next 10 years. CUDA first entered into a partnership with Initiative Ireland in August 2020 to establish a new Fund that would lend to Approved Housing Bodies (AHBs), with the goal of supporting the delivery thousands of much needed affordable and social homes. The Fund has now received final approval from the Central Bank enabling Credit Unions who have committed to the strategy, to now commence investment.

The new fund will enable Credit Unions from across Ireland to avail of regulatory changes which empower the Credit Unions to lend to Approved Housing Bodies through regulated funds. Initiative Ireland, which specialises in funding social and affordable housing developments nationwide, will act as an Investment Advisor to the fund, sourcing and managing projects with Approved Housing Bodies. CUDA, with membership of over 50 Credit Unions nationwide, which manage over €7bn in assets, shall support engagement with member and non-member Credit Unions as a sub-adviser to the Fund Distributor, with the expectation that the fund could lend over €600m to deliver over 1,000 new homes per annum.

Commenting on the announcement, Minister of State with responsibility for Financial Services, Credit Unions and Insurance, Sean Fleming TD said,

“I would like to commend the partnership between Initiative Ireland and the Credit Union Development Association which will see the delivery of thousands of social and affordable homes by our Affordable Housing Bodies. Since I became a Minister, it has been a personal priority of mine to facilitate Credit Union investment in large scale social housing projects. Credit Unions, which are an embedded in our towns and villages, are to become one of the key funders of new homes in so many communities across the country. I truly believe that the involvement of credit unions is absolutely appropriate and a watershed moment in terms of scaling up the delivery of homes for so many.”

Kevin Johnson, CEO of CUDA said,

“CUDA and Irish Credit Unions have been working on this development for some time and we are not surprised by the huge interest amongst Credit Unions. As a result, the Fund will be open to all Credit Unions regardless of whether they are CUDA members or not. Through this new fund, CUDA members will play a key role in supporting an increase in supply of much-needed housing nationwide. The fund will provide competitive finance to Approved Housing Bodies which play a key role in the delivery of social and affordable housing today. The Fund will offer an ongoing sustainable and affordable source of funding for Housing Bodies and enable Credit Unions to deploy considerable members savings into a conservative, sustainably managed strategy.”

 Padraig Rushe, CEO Initiative Ireland said,

“Initiative Ireland specialises in funding the delivery of private, social and affordable housing across Ireland, working with developers. Through the Fund, we can now also provide flexible and fast funding to Approved Housing Bodies to commission and acquire completed developments. Combined with our existing finance offering for developers, we can help to deliver a balance of private, social and affordable housing where it is most needed.”