ILCU demands fall on deaf ears?

Joint committee on Economic Regulatory Affairs hears of ILCU fears that regulation may become too robust

Murphy’s Law dictates that a buttered slice of bread will invariably land buttered side down should you drop it on your lap. On the 2nd February last, the ILCU brought the entire loaf and proceeded to butter both sides before dropping it on its lap.

You can read of its bread buttering episode here: http://debates.oireachtas.ie/DDebate.aspx?F=ERJ20100202.xml&Node=H2#H2

It’s once again a story of unreconstructed Irish brand of credit unionism combining with a trade body’s corporate ambition to become an in-system regulator. ILCU wants to become the central governing corporate body for every registered credit union. This ambition bears some resemblance to federalist systems found at the heart of European credit co-operatives, Canadian Des Jardins and to a lesser extent Canadian Credit Unions. Key to these systems working is the notion of devolved supervisory authority from state regulators -a form of state and private system supervision and regulation.

Rather than argue for a proper Irish federalist co-operative system, ILCU wants to turn the clock back to the good old days when it held the credit union regulator captive of its corporate designs. The days when under the Department of Enterprise Trade and Enterprise (DETE) it almost managed to get its savings protection scheme – an ad-hoc insystem regulatory process – approved under section 46 of the 1998 credit union act.

(In 2001 on announcing the enactment of section 46, the departmental press release says that only non-affiliates of ILCU need comply, implying of course that ILCU’s scheme was an approved one. Which of course it wasn’t and it remains unapproved to this day.)

Promoting a return to the past, ILCU built its argument on fears that the Central Bank Commission will regulate and supervise credit unions as banks. There isn’t a scintilla of factual evidence to back this assertion.

At this time the Financial Regulator is engaging consultants to produce a report:

The Minister for Finance has directed the Financial Regulator to carry out a strategic review of the credit union sector in Ireland. This will involve an examination of the structure, operation, regulation and legislation of the credit union sector with a view to providing a report making recommendations, including specific proposals to strengthen prudential soundness, which will advise and inform an assessment of the future strategic direction of credit unions. CBFSAI 22nd December 2009.

In fact ever since the establishment of IFRSA in 2003, the experience has been of an effective regulatory approach being executed for credit unions - appreciative of their organisational form. For example fitness and probity, consumer protection, minimum competency codes are to be developed specifically for credit unions whose core business is not regulated under codes of business conduct applying to banks.

In referring to separate regulatory authorities ILCU said : “All large developed countries of the Western world that have credit union movements have separate regulation for them.” They do of course have separate “regulations” but not all have separate “regulators” for example Australia and the UK.

It seems the only argument ILCU could make related to “some” volunteers experiencing an overzealous approach by the regulator. Is ILCU dealing in rhetoric and perceptions rather than facts or reality? It appears so.