Craic On

Those in Central Government almost invariably believe in central control of everything. The Moville Credit Union is very well run and has no financial problems. Indeed they have the opposite. They came through the credit crunch very well and have no problems that will need the central government to step in – yet that is what the Central government is threatening.

Unlearned Lessons

They have not learned the lessons of the centralisation of power in our big banks like AIB, Anglo and Bank of Ireland. I remember in about 2007 or 2008 going to the bank manager to increase the limit on my card as it was too small to book a holiday online. Everything seemed to be fine and he was confident. However, I was surprised when it was rejected. I think the credit crunch was just starting to bite around then. I got the rejection via a letter from head office.

It was then that I realised that the decision-making had been taken away from the local branches on who to give loans to. It was centralised. All he could do was help me to fill in the form. The power was now at head office in Dublin and the decisions was taken by some young graduate in the risk assessment department with the help of some fancy risk assessment software systems.

Banking Systems

This centralisation in loan making decisions was the main cause for the foundering of the banking system which has hit the Irish economy and Irish taxpayers so hard. First of all at central office they were loaning far too much money to people they didn’t know and from about 2007/8 they have been loaning too little.

They had been given bonuses for each mortgage they sold so why shouldn’t they sell as many as possible to anyone who would take them. They got their bonuses at the end of the year any wouldn’t have to give them back if the mortgage holder defaulted.

Old Methods

In the UK there’s a new bank from Sweden doing very well. It is called Handelsbank. They are about to open their 150th bank there. They go back to old-fashioned values and the people taking loan decisions are those at the local branches. They have handed power back to them. The CEO said that he didn’t even know where the 150th branch was going to be as that decision was being taken locally.

The local branch manager knows the local people and knows who is likely to be able to pay back the money and who is less likely. This was how banking used to be here in the days when the banks were trusted.

Government

Now, because a few credit unions got it wrong the Government wants to centralise power. So many Governments think that centralising decision-making is a good thing. After all they are the central Government and they are the fount of all knowledge as far as they are concerned. they don’t like any powers that local Government have.

There is this belief that most of the clever people reside in Dublin and are terrified at the though of some of those people who live in the backwaters having any decision-making powers – and yet these people are the ones who know if local people are credit worthy or not.

Another Fix

if there is a problem with a credit union branch somewhere it would be better to let another nearby local branch nurse then back to fitness for a while, with maybe a change of management before they can be allowed to act on their own again. Centralising power just hands it to people less well placed to take loan making decisions – despite the fancy graduates and fancy computer systems they have.

It looks like the Government are going to screw this up to and punish healthy branches like Moville Credit Union and take away some of their decision-making powers. They haven’t learned the lessons of what has happened at the big banks.

In Moville we have one bank, AIB, closing and another, Ulster Bank, under threat. We have a healthy Credit Union. So why put it under threat by forcing the same centralised system that scuppered the big banks on it?

It makes no sense.