Editor's Note: in September, Ray Crouse, President of Allegacy Federal Credit Union’s Business Solutions, was invited to speak to Irish Credit Unions on the use of CUSOs in the United States and alternative revenue sources. The trip was organized by Guy Messick of the Messick & Lauer, P.C. and sponsored by the Centre for Collaboration at the University College Cork and a local credit union chapter. Crouse and these organizations were joined by Mark Zook, CEO of MaPs Credit Union, Kirk Drake, CEO of On-Going Operations and Jeff Russell, CEO of TMG Financial Services. Crouse wrote a summary of the trip that is posted below.
Credit Unions in Ireland are under pressure by their regulators to improve their services or be in a position to reduce their numbers. Currently there are 426 credit unions in this country of 4 million and the regulators have indicated they want that number to be less than 100 in the next three years.
Ireland's credit unions are required to maintain 10% capital in addition to being required to appraise their buildings on an annual basis. The Irish economy has resulted in a 60%+ devaluation of commercial property thus causing more strain on the credit unions as they have to write down their property values on their own buildings.
While we were there the government announced their credit union reform committee, which is chaired by a Canadian. We presented a summary of our revenue diversification ideas at the Credit Union Management Association meeting in the city of Athlone during the middle of the week.
We followed up with an all-day discussion at the University College Cork on Saturday. We discussed the pressure on net interest margin and the need to look at other revenue streams. We were surprised to find out there are no regulations on permissible CUSO activities. The regulator reviews each request and judges their merit.
Not surprisingly there are only three CUSOs that have been formed and none are operational. We urged the credit unions to develop the means to earn alternative income sources by proposing to their regulators permissible activities for CUSOs. We also presented to them how they could significantly reduce operating expenses by utilizing CUSOs to handle back office functions for multiple credit unions.
Irish Credit Unions have very loyal members and over 60% of the Irish citizens do their banking through credit unions. However, most credit unions are neighborhood based resulting in a smaller asset sized credit unions. This makes it imperative to collaborate and leverage CUSOs to drive their operating expenses down and increase alternative revenue to survive.