Managing Transformation: Balancing Growth & Community Involvement David Matthews Irish League of Credit Unions 28 th August 2015

CREDIT UNION Growth in Our Hands Contents The Irish Credit Union Movement A brief history of transformation Our changing environment Challenges Strengths & Weaknesses Opportunities & Threats Making it happen Q & A

CREDIT UNION Growth in Our Hands Discussion question? How do we ensure that regulators recognise and value the “credit union difference”? Democratic – one member one vote Volunteerism Community based Lending – social considerations Business decisions – “not for profit” motivation Non-financial factors

CREDIT UNION Growth in Our Hands The Irish Credit Union Movement 462 credit unions (down from 525 in 2010) & falling 366 in the Republic, regulated by the Central Bank of Ireland 96 in Northern Ireland, regulated by the PRA / FCA 3m members, 1.8m active, 600k borrowers €14.8bn in assets, savings €12.4bn, Loans €4.2bn (32% v 75%+ in Scotland) 7,500 volunteers, 2,500 paid staff Irish League of Credit Unions Trade & representative body for 451 credit unions Representation at local, national and EU level Business services (legal, training, marketing, HR, research & development, insurance, payments, compliance) Monitoring / Savings Protection Scheme

CREDIT UNION Growth in Our Hands A brief history of transformation Responsibilities of the Board of Directors: Control, management & direction of the credit union 1960s – control, hands-on, everything done by volunteers 1970s & 1980s – subtle shift, especially in established credit unions 1990s – management, still hands-on but greater reliance on paid staff and managers 2000s – direction, less hands-on, but role confusion evident 2012 – new legislation in the Republic, soon the follow in the North CEO / management team – executive role / operations Board – Governance, strategy, oversee the management team More confusion!

CREDIT UNION Growth in Our Hands Our changing environment Catalyst 1 - the financial crisis Bad debts and poor investment decisions – ammunition for Regulators! Societal issues – people reluctant to borrow Catalyst 2 – technology and changing member demands Catalyst 3 – movement consolidation Driven by viability & capability considerations The need for professionalism Fitness & Probity / Approved Persons Regime The need for specialist skills IT, marketing, accounting, risk management The Regulators’ viewpoint Remit is to protect members’ savings Responsible for members’ money!

CREDIT UNION Growth in Our Hands Challenges Credit unions are different! But – the “credit union difference” is under threat! Conflict between social goals and financial goals? Lending – now “just like banks”! All members are equal – but some are more equal than others! Professionalism at the expense of a social conscience? Now regulated as banks Belief that Regulators and Governments do not understand credit unions? How do we meet these challenges without losing our identity? Can we survive?

CREDIT UNION Growth in Our Hands Strengths & Weaknesses Strengths Ethos (not for profit, etc.), personal relationship with members, all members treated equally, trust in our brand, reputation for honesty, volunteerism, dedication of volunteers, community / local base Weaknesses Volunteerism equated with a lack of professionalism, skills deficit (technology, strategy, risk management, lending), movement fragmentation, poor “cooperation among cooperatives”, size and scale, aging membership Are we “well-meaning amateurs” or unpaid professionals?

CREDIT UNION Growth in Our Hands Opportunities & Threats Opportunities Lending (social lending – back to our roots, mortgages, changing our passive lending culture, untapped member base) Mistrust of banks Scope for much greater cooperation among credit unions Movement consolidation Threats Over-regulation Competitors (new and existing), moneylenders Movement consolidation! Do members really care about the credit union difference?

CREDIT UNION Growth in Our Hands SWOT Summary How do we use our strengths to capitalise on opportunities and minimise the impact of threats? How can we build on our strengths? How do our weaknesses prevent us from capitalising on opportunities and defending against threats? Can we fix our weaknesses?

CREDIT UNION Growth in Our Hands Making it happen Training & up-skilling of volunteers Attracting the right people by promoting the benefits of volunteerism Changing our lending culture Being more proactive Our product is the best on the market! Getting to the youth market – our biggest challenge Cooperation is the key – can’t do it alone (especially technology) Changing the regulators’ mind-set Work with them Prove that we can control our own destiny

CREDIT UNION Growth in Our Hands Discussion question? How do we ensure that regulators recognise and value the “credit union difference”? Democratic – one member one vote Volunteerism Community based Lending – social considerations Business decisions – “not for profit” motivation Non-financial factors

CREDIT UNION Growth in Our Hands Thank you for listening – any questions?