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How might Covid-19 affect Irish Credit Unions?

A furthermore Workstream was proposed by the Chair to explore the effect on credit unions of the adverse economic conditions resulting from the COVID-19 Pandemic.

Academic research was assessed to identify potential insights. Eight were identified and included, the important role of Credit Unions in the smoothing of lending and liquidity to households and small firms; that industry consolidation occurring in the aftermath of a recession is driven by both mergers and failures; that collaboration enables Credit Unions to achieve economies of scale and engage in activities that individual institutions may regard as too costly or risky; and FinTech and the digitalisation of products and services is increasingly shaping the business model of Credit Unions.

The sector was benchmarked as it was in September 2007 (prior to the Financial Crisis) against how it was in September 2019 (before the onset of the COVID-19 Pandemic) to assess if credit unions are now better placed to weather a prolonged economic downturn.

Compared to 2007 Credit Unions in 2019 are better capitalised, liquidity levels are higher and loan arrears are lower, however operational cost to income ratios are much higher and ROAs lower.

Case Studies, undertaken by the CEOs of ten credit unions, completed the analysis. Views were sought to five questions including what will be the longer lasting changes required by the Movement as a consequence of the COVID-19 Pandemic?

The CEOs believed that sectoral consolidation and more shared service arrangements were needed to provide the breadth of products and services and the technology based delivery mechanisms required by members. A renewed focus on Business Model Development was a necessity. Digital solutions were viewed as the future as they drive down cost and provide far better member/customer experiences. The introduction of measures to facilitate organic credit union growth (risk based capital, operational standardisation, collaboration, management skills developmentā€¦) were needed. More was sought from the representative bodies to help mitigate sectoral pressures.

The existence of the CEO Forum facilitated a rapid dissemination and sharing of views to deliver a strategic insight on current COVID-19 challenges.