Credit unions cannot become complacent despite having avoided the worst case scenario envisaged at the time of the financial crisis, according to the Irish League of Credit Unions registrar.

In a speech due to be given at the league’s AGM, Anne Marie McKiernan was to say that while the feared failure of a significant number of credit unions had not occurred, the sector could have false sense of security and should not undo the “hard-won financial improvements” of recent years.

She said high arrears rates, falling loan and investment income, regulatory compliance and business model challenges as “significant vulnerabilities” in the sector.

“Now is the time to put restructuring and business model transformation to the forefront, to achieve better outcomes for members, to enhance the financial soundness of credit unions and to act as an enabler for future growth and development,” according to the script.

Ms McKiernan said the scale of restructuring of the sector had fallen well short of what was necessary to tackle the viability challenges facing it and said there had been very limited transformation of the credit union business model.

“The critical challenge now for your sector is to address the shortcomings of your business model, your ageing membership base, your ability to grow and develop your product and services offerings and your lending business, and your ability to meet regulatory requirements.

“We have yet to see a sufficiently structured and collaborative response, at the sectoral level, to the scale of business model transformation required to ensure a vibrant future.”

Ms McKiernan said her office would be inviting interested parties to take part in talks on possible ways to transform business models including consumer mortgages, small personal loans, personal current accounts and credit risk management best practice.

She also raised concerns over investment returns and possible risk to the funds of credit union members.

“It is very important that the drive to generate income for the credit union does not overshadow the need to be prudent and to understand very clearly the inherent risks that generally go hand in hand with the promise of higher returns,” she said.