IRISH banks have lobbied the Financial Regulator to launch a regulatory clampdown against credit unions, claiming the regulator is not making full use of its powers to police lending by the volunteer institutions.

Despite a series of high-profile banking scandals and state bailouts, the Irish Banking Federation has urged the regulator to renew its focus on credit unions, arguing that the movement's savers are less protected than those using banks due to mounting credit union arrears.

In a letter to the regulator, the federation's head of retail banking, Eimer O'Rourke, said that credit unions needed "to come fully up to the mark in terms of appropriate regulatory and risk controls".

She also reminds the regulator of its obligations under the Credit Union Act to "protect the funds of members and maintain the financial stability and well-being of credit unions".

O'Rourke refers specifically to draconian measures contained in the act which grant the regulator the power to do anything which in his opinion is necessary to facilitate the exercise of its functions.

"We look forward to seeing the regulator and the registrar of credit unions utilise the power which they have been provided with under law," she said.

The letter was written last January, less than a month after the nationalisation of Anglo Irish Bank after a series of damaging revelations about concealed loans to its chairman Sean FitzPatrick. The registrar of credit unions is Brendan Logue.

A spokeswoman for the Financial Regulator declined to comment on the content of the letter but said it formed part of a consultative exercise on a voluntary consumer protection code for credit unions.

"All submissions received are currently under review and it is anticipated that the finalised voluntary standards will be published during the third quarter of 2009," she said.

l Meanwhile, Anglo Irish Bank has dramatically reduced the interest rate on its one year fixed deposit accounts having been consistent market leaders.

Up until the middle of this month the nationalised bank was still offering customers an attractive 4.4% fixed rate for 12 months with only one other bank – Investec Ireland – bettering it. However, Anglo has now reduced that rate to just 1.58% putting the bank at the back of the queue for long term deposits. At the height of the boom, Anglo had been offering 6% in September last year.

Head of Personal Savings, Derek Keogh said that the move was prompted by consumer sentiment with more customers moving away from fixed term accounts.