‘Business model evolution is not about limits, it is about a broader and clearer response to members changing needs’

Registrar of Credit Unions address at Credit Union Managers’ Spring Conference

• Leadership crucial in order to meet challenges and business model development in the sector.
• The Registry does not seek to constrain business models, but to ensure that proposed developments are properly costed and risk assessed.
• The sector has moved significantly on the need for restructuring, but cost base needs to be addressed.

Speaking at the Credit Union Managers’ Association Spring Conference today, Registrar of Credit Unions, Anne Marie McKiernan, focused on the ongoing business model challenges faced by credit unions. She urged the sector to ‘mind the gap’ between current and future business model proposals and the sectors financial, operational and regulatory compliance capabilities.

She noted the significant change taking place in the sector, saying that as the sector consolidates, different challenges emerge for larger, more complex firms on the one hand and for individual credit unions struggling to address underperforming business models and meet basic requirements on the other. She also drew attention to still basic failings in some credit unions, adding that these need to be prioritised before taking on new risks.

On addressing business model challenges, Ms. McKiernan told delegates that the approach must have twin tracks:

• To meet existing obligations to members to safeguard their funds - improving standards of regulatory compliance; and
• To develop financial and operational strength, and capability, to manage the transition to different business model offerings, and deal with the risks involved.

Ms. McKiernan said that the Registry of Credit Unions had established a new function to engage on business model change with credit unions. She outlined that the three biggest recurring themes, stating the Central Bank’s views on each of:

1. payment account services, including debit cards
2. longer term lending, with an emphasis on mortgages and
3. investment in social housing.

She concluded by saying that business model evolution is about a broad based response to members’ changing needs. She said it was up to credit union leadership to decide the extent to which credit unions can realistically deal with the major challenges posed by business model development. She highlighted that the Registrar is open to proposals and called for the sector to put its energy and focus behind improving existing initiatives.