Gather a group of credit union execs together in a bar and over beers the fermentation will turn to lamentation as the group debates whose operation has had it the worst over the past few years.
Sponsor company closings. Downsizings at the companies that remained open. Members whose only home equity is the copper pipes in the walls. Folks turning in enough keys to turn your branch into a dealership. Paid-in capital at corporates that will never be paid out.
And lurking like the king's tax man eager to take whatever grain might be left on the floor, NCUA with its assessments.
Bartender, another round please!
But if the CEOs and managers pause for a moment there's another gent sitting alone and not saying much who'd like to pull up a chair, clear his throat and between gulps of Guinness set you straight that it hasn't been all emeralds on the isle, either.
A Gray Sky
As you may be aware, Ireland's credit unions have been struggling mightily for at least the past five years. It isn't enough that the Celtic Tiger devolved into a kitten, but the country's credit unions have themselves to blame for a number of self-inflicted wounds, as well. Some CUs have closed, and toughest of all for a proud Irish movement, the good name of CUs in the country has at times been as gray as a February sky.
Indeed, the situation has reached the point where earlier this month the country's credit union regulator, the Minister for Finance, appointed an industry Restructuring Board to determine how CUs should be reorganized in order to better sustain it, including which credit unions should be merged.
Looking for options, Ireland's credit unions, along with the Centre for Cooperative Studies at the University College in Cork, invited a group of U.S. credit union reps to talk CUSOs. When they arrived, they found a country with approximately 400 CUs, most of which have a community charter and the largest of which has $300 million in assets.
According to long-time general counsel to many CUSOs in the U.S., Guy Messick, who was part of the delegation, conditions in the country would lead many a CU leader to move their offices to a pub. Mergers can take up to two years to complete, and CUSO investments are approved on an ad hoc basis, noted Messick. "There is a payment services CUSO established by the Irish League of Credit Unions that has had an application pending with the regulator for over five years," he added.
Messick said he and others from the U.S. group, which included Mark Zook, chairman of NACUSO and CEO of MAPS Credit Union; Kirk Drake, CEO of Ongoing Operations; Ray Crouse, president of the CUSO Allegacy Services, and Jeff Russell, CEO of the CUSO TMG Financial Services-quickly learned Ireland's CUs are eager to maintain their independence and to save as many CUs as possible.
Just as U.S. credit unions have had to do, and as Credit Union Journal continues to report on an ongoing basis, there is a need in Ireland to develop alternative income sources. Given the reason the guests were there, talk obviously turned to CUSOs.
What likely won't work, the Americans advised, are collaborations driven by regulators and trade associations. Instead, those efforts must come from grassroots CUs, a process best begun by "small groups of trusted colleagues (who) begin with easy service offerings to build the confidence to expand into more complicated collaborations."
"If they can develop the legal framework to enable them to work together, they have an excellent opportunity to preserve a vibrant credit union industry," said Messick, of the Media, Penn. firm Messick & Lauer.
The Yanks urged a framework for the creation of CUSOs without the need for lengthy regulator review, plus a speed up of the merger process if a forced merger is necessary. They noted that excessive delays reduce and nullify the benefits of collaboration and mergers.
A Dog is A Dog is A Dog
But all the worried talk in Ireland about mergers does "not address the fundamental problems," said the visitors, offering a view as applicable in the U.S. as it is in Ireland.
"Without the ability to generate new sources of revenue and bring the benefits of scale from within and outside the credit union industry, the underlying credit union business model will not be sustainable," said Messick. "Financial institutions all over the world can no longer rely upon operating on a net interest margin. All mergers do is move capital among credit unions to cover losses and that solution will cease to work when the industry runs out of excess capital and credit unions to merge. By just making credit unions larger through mergers does not create lasting benefits. A bigger dog is still a dog."
Frank J. Diekmann can be reached at email@example.com.