Finance minister Brian Lenihan has given only vague assurances to credit unions that he will limit the powers granted to the Financial Regulator in the Central Bank Reform Bill, raising fears that the cooperative movement could lose much of its autonomy despite weeks of intense lobbying.
Lenihan is believed to be willing to water down or remove language in the bill giving the registrar of credit unions a free hand to dictate policy to individual credit unions. No final decisions have been made, however, the Department of Finance said.
Credit-union sources said the negotiations were at a delicate stage and could still falter this week.
The Irish League of Credit Unions (ILCU) and the Credit Union Development Association (CUDA) met Lenihan separately last week in meetings described by attendees as "positive" and "open", but sources involved in the talks said the minister made no specific commitments.
ILCU, which represents more than 400 credit unions in the Republic, met yesterday to consider how it would approach the minister this week as discussions between credit unions and the Department of Finance resume this week.
The league wants to renegotiate conditions the registrar is imposing on credit unions which extend loan terms to help out struggling borrowers. The credit unions also want to remove language in the bill giving the registrar open-ended powers and instead put discussion on expanding regulatory oversight until a review process has been completed next year.
Sources said the department and credit unions had not reached agreement, despite a statement from Green Party senator Dan Boyle last Thursday that the government "recognised the separate and distinct position of credit unions in how they should be regulated". The cabinet is understood to have considered a discussion paper on the matter last week, but came to no conclusion on whether to change the legislation.
As revealed in the Sunday Tribune, the Financial Regulator began a review of credit union loan books earlier this month to examine "potential stresses" across the sector as officials fear the full impact of the recession on the cooperative lenders is only beginning to become apparent, regulatory sources said. The move comes after assistant director general of financial supervision Jonathan McMahon told an Oireachtas committees that 20 credit unions faced serious solvency issues.