ReBo, 2nd Floor IPC House, 35-39 Shelbourne Road, Ballsbridge, Dublin 4. 01 9022 209
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1. What is ReBo?

The Credit Union Restructuring Board “ReBo” was established on 1st January 2013 in accordance with the Credit Union and Co-operation with Overseas Regulators Act 2012 as the statutory body responsible for facilitating and overseeing the restructuring of credit unions to support their financial stability and long term sustainability. The 2012 Act was the product of extensive engagement within the credit union movement through the Commission on Credit Unions whose report set out recommendations for the voluntary consolidation or restructuring of the credit union sector over time, recognising the need to maintain local presence and taking into account the credit unions’ not-for-profit mandate, their volunteer ethos and community focus.

2. What are the guiding principles of ReBo’s Work?

ReBo’s strategic plan has stated that its vision is for vibrant and sustainable Credit Unions that are credible, trustworthy providers of financial services to members. The work of ReBo will be achieved in a voluntary, incentivised and time bound manner.

Voluntary: No credit union will be forced to merge
Incentivised: Financial support will be made available to assist with merger costs
Time Bound: The Minister for Finance, Mr. Michael Noonan TD, recently announced 31st March 2016 as a final date for acceptance by ReBo of any further restructuring proposals.

3. Why are credit unions restructuring within Ireland at present?

It is widely acknowledged that the current credit union model is under pressure. Credit union income is under threat as the average loan to asset ratios have significantly fallen. Operating costs now exceed loan interest income in approximately half of all credit unions. Therefore credit unions are reliant on investment income to support costs, dividends and reserves. With ECB interest rates at an all-time low and forecast to remain low for the foreseeable future, the rate of return on investment income is expected to fall, further compounding stresses on a significant number of credit unions. Credit unions are also experiencing some upward cost pressure, particularly in the areas of compliance as a result of the enactment of the 2012 Act.

4. What are the benefits associated with credit union mergers?

There are many benefits associated with a merger. It provides credit unions an opportunity to secure the expertise they need to devise a strong business plan to address current difficulties and to develop a more sophisticated business model which will assist credit unions to: address gaps in operational capacity; income generation / products and services; investment in modern IT platform; enhance branding and marketing. Credit unions involved in mergers can also generate cost efficiencies in audit, risk & compliance, marketing, IT, annual subscriptions, external expertise and advice.

6. What is the difference between a Restructure and a Resolution?

A credit union restructure is a credit union involved in a merger with another credit union(s). However a resolution is a process managed exclusively by the Central Bank and specific legislation. The Central Bank and Credit Institutions (Resolution) Act 2011 gives the Central Bank, in certain circumstances, a number of resolution options including seeking a transfer order from the High Court directing the transfer of the assets and liabilities of a credit institution.

7. How long does it take to complete a Merger?

This can vary, however with effective planning a credit union can complete a transfer within 6-9 months from the initiation of due diligence.

8. What is the process involved in completing a merger?

There are three phases within a transfer of engagement. The initiation, reporting and the completion phase.

The initiation phase
This involves credit unions engaging in discussion and forming a provisional agreement on which they can proceed. It also involves preparing a high level business plan to validate the proposed merger is financially sound etc.

The reporting/due diligence phase
This involves due diligence being complete on all of the credit unions involved in the proposed transfer of engagement and preparing reports for each credit on same. It is also necessary to complete an implementation plan to document how the TOE will be implemented. A detailed business plan will also be required in order to gain approval from the central bank.

The Completion Phase
This involves communicating with all the relevant stakeholders (members, board of directors, central bank and general public) within a specified 12 week period. All aspects of the completion are governed by the 1997 Credit Union Act.

9. What is due diligence?

Due diligence is the process of forensically reviewing a credit union which is involved in a credit union transfer of engagement. It reviews all financial, operational and governance aspects of a credit union to ensure that all potential risks within the credit union are identified.

10. What is the role of members in a merger?

A credit union board of directors can make the decision to complete a transfer of engagement by either board resolution or by member resolution.
A board resolution is where the directors of the credit union make the decision to transfer on behalf of members. This requires a majority and in this instance the board have to communicate to the members of their intention to transfer (during which members have a 21 day period within which they can object to the central bank).
A member resolution involves calling a special meeting of the members during which members will take a vote on the proposed transfer which requires a 75% majority in favour.

11. What kind of a workload is involved in completing a merger?

A merger is a comprehensive process but not a complex one. Many credit unions chose to appoint a project manager to complete the majority of the workload. Many credit unions also appoint a steering committee with representatives from management and the board of directors from each of the credit unions involved would act as the main point of contact for project manager during the TOE process.

12. Can a credit union retain the same name over the door after a merger?

Yes, it is possible for the credit union to retain the same name over the door after the transfer, however the headed paper which the credit union uses will have the name of the legal entity on it.

13. How does a merging credit union ensure that local knowledge of members is maintained?

As part of preparing a restructuring proposal, credit unions will have to demonstrate the merger is in the best interest of members and that it will enhance the presence of the credit union in the local community. It is possible to have sub-committee at each branch office of the new merged entity which will ensure that all relevant information and recommendations are passed to the board of directors in the same way as normal and that continuity of service to members is maintained.

14. How does the transfer affect the staff of transferor credit union?

There is special protection of all staff involved in a transfer and therefore all terms & conditions and length of service are simply transferred to the transferee credit union. It is not possible to anticipate whether there will be redundancies, as all merger proposals are different. However ReBo have not seen redundancies proposed as part of any merger proposal as yet, but the transferee credit union can make redundancies under the normal grounds for redundancy (organisational, technical or economic).

15. What is the typical formation of the new board following a merger?

The new merged credit union will comprise of 11 board members. It is a matter for the credit unions involved to come to an agreeable solution in relation to the board formation of the merged credit union and in many cases the board formation will reflect the asset size of each of the credit unions involved.

16. What assistance is available from ReBo?

ReBo can pay up to 50% of the total costs associated the TOE to include: due diligence; business consultancy; IT software & hardware; legal; HR; communications; postage. All financial support is subject to terms and conditions. If a merger does not go ahead, ReBo will still pay for 50% of the costs incurred, once all parties involved in the merger declared all material information and had full disclosure on all relevant information. ReBo also provide specialist advice throughout the process and have a suite of templates designed to assist credit unions in the preparation of material required to execute the merger.

17. What are the typical issues of negotiation between merging credit unions?

Before two or more credit union will decide to formally explore a merger, they will invariably discuss certain key issues of importance to their credit union, these issues typically include:

  • Maintaining service levels and local branch office
  • Keeping credit union name/chose new name for all the credit unions
  • Maintaining staffing levels and no redundancies as a result of merger
  • Board formation
  • Local knowledge and service to members
  • Who will be the transferor / transferee credit union
  • Management structure of new merged credit union

18. How can ReBo assist credit unions who wish to transfer?

ReBo can assist by providing financial support as outlined earlier and ReBo can also provide expertise and professional advice to credit unions engaging in restructuring. We have developed a merger process manual to provide a step by step guide on the process from initiation to completion. ReBo can play a role in facilitating discussion between like-minded credit unions who wish to pursue a merger. ReBo can also communicate with the central bank on their behalf of the credit unions involved in a transfer with regard to seeking approval from the Central Bank at the key stages of the merger.

19. Is it compulsory to involve ReBo in a transfer of engagement?

No, credit unions may choose to complete a transfer without involving ReBo but those credit unions will not qualify for financial support. The central bank may also question the merging credit unions as to the basis for the decision not to involve ReBo in the process, given the statutory function of ReBo.

You can view a PDF document of all these questions and answers here.

* For more information on ReBo or on restructuring contact a member of the restructuring team on (01) 9022209.