Credit unions are regulated and supervised at member-state level, but are nonetheless affected by European policy-making with respect to a number of issues:

Capital Requirements Directive (Basel II)

Due to their structure and small-scale business operations, Article 2 of the Capital Requirements Directive (CRD) exempts credit unions in the Republic of Ireland, the UK and Poland from the application of the CRD. Credit unions are instead subject to appropriate regulatory capital requirements at the national level.

However, credit unions in some new member states, such as Romania, are not on the list of institutions excluded from the CRD. This results in a different treatment of credit unions in these countries as well as a limited ability to provide services. The European Network of Credit Unions assists colleagues in these countries to achieve a legal status for credit unions equal to the one they benefit from in other EU member states.

European Directive on Capital Requirements

Deposit Guarantee Schemes

Credit unions in most countries operate their own (regulated) protection schemes and/or have access to state-backed deposit guarantee schemes. Access to such schemes still poses an issue in those countries that have not granted an exemption for credit unions from the CRD and consequently consider them as financial institutions (as opposed to 'credit institutions with a CRD exemption').

Credit Unions comments on the Review of the European Directive on Deposit Guarantee Schemes (October 2008)

Financial Sector Tax

Following bail-out programmes and sovreign debt crisis, the EU is investigating various options for introducing a financial sector tax in the form of a Financial Transaction Tax (FTT) or a Financial Activities Tax (FAT). Credit unions are concerned about the increase of regulatory burden that we can already see today in our jurisdictions and strongly oppose an inclusion of credit unions - which have neither caused the crisis nor received bail-outs - in the Commission's initiative on introducing a financial sector tax.

Submission by the European Network of Credit Unions to the European Commission's consultative document on a financial sector tax (2011)

Corporate Governance

Based on work by the Organization for Economic Co-operation and Development (OECD) on good governance, the members of the World Council of Credit Unions (WOCCU) have developed and agreed upon the "International Credit Union Governance Principles" to address the unique characteristics of credit unions' governance. Individual credit union movements have developed complementary governance principles aimed at strengthening best practice and membership focus.

The European Network of Credit Unions is supportive of EU initiatives to strengthen corporate governance, bearing in mind the different structures of financial institutions (e.g. cooperatives) and avoiding a one-size-fits-all approach.

Submission by the European Network of Credit Unions to the European Commission consultation on corporate governance 2010

IFRS for SMEs

In 2009, the International Accounting Standards Board (IASB) in London adopted the IFRS for SMEs which provides for a simplified accounting standard for small and medium-sized entities (SMEs). The IASB excluded credit unions from the scope of the SME standard arguing that credit unions are publicly accountable and as such need to be covered by the full IFRS.

The European Network of Credit Unions strongly advocates that the IFRS for SMEs can and should be used by credit unions. They serve a restricted membership (within the common bond) and differ substantially from mainstream financial providers in terms of structure, organisation, business operations, etc. The vast majority of credit unions fall within the definition of micro and small entities. Compliance with the full IFRS (as opposed to the IFRS for SMEs) is very burdensome in particular for the small, rural credit unions.

Mortgage Lending

Credit unions in the EU provide mortgage lending services to their members on a very limited basis. In the UK, for instance, only five credit unions provide mortgages (i.e. those that have a special FSA permission.) Mortgages are usually offered only by the largest credit unions. Mortgage lending by all credit unions occurs within strict loan policies that encompasses rules for the assessment of a borrowers’ credit worthiness, loan portfolio diversification, maximum loan sizes per product type, etc.

Submission by the European Network of Credit Unions on the European Commission consultation on mortgage lending by non-credit institutions (February 2009)

Commercial practices (tying, bundling)

In order to strengthen consumer protection and guarantee switching of products/ providers, certain commercial practices have come under enhanced scrutiny, including the practices of tying and bundling of products. Credit unions are committed to providing the best service to their members and employ certain tying practices for the following reasons: member service, credit union tradition (insurance that the 'debt dies with the debtor' linked to loans), linking lending to saving, risk reduction, responsible lending, and financial education.

• European Network of Credit Unions submission to the European Commission consultation
• Additional evidence by the European Network of Credit Unions

Consumer Credit

Credit unions’ provision of consumer credit is regulated at the national level and by the European Directive on Consumer Credit. Taking into account credit unions’ small-scale operations, the CCD provides for lighter regulations for credit unions. As a result, Member States may decide to subject credit unions to a limited number of requirements contained in the Consumer Credit Directive (Article 2.5).

European Directive on Consumer Credit (May 2008)

Microfinance

Credit unions are globally recognised microfinance institutions (MFIs) which help people access financial services, including micro-saving facilities, micro-loans and micro insurance. In this way, credit unions help empowering member who are often unbanked and rely on low and no regular income.

The average credit union loan across the EU is as follows: Poland- €1,000; Ireland- €8,150; UK- ₤1,000; and Romania- €700. Loans are used by members for various purposes, including consumption, starting a small business, growing an existing small business or financing a university education or other studies.

• World Bank’s Consultative Group to Assist the Poor
• Data on credit union microlending (April 2007)

Financial Inclusion

Credit unions are committed to enhancing access to financial services to people on low or no regular income. Examples within the European Network of Credit Unions include the "Credit Union Current Account" offered by British credit unions, or the "Regular Account" offered by Polish credit unions to the financially excluded, often unemployed and poor people. These accounts take into consideration the particular needs of members with low or no regular income, allowing them to access ATMs, use debit cards and payment services.

The European Network of Credit Unions supports and encourages EU initiatives to ensure access by all consumers to a basic transactional account. This initiative should be accompanied by increased efforts to open up payment infrastructure to credit unions and other deposit-taking, non-banking institutions.

• Submission by the European Network of Credit Unions to the European Commission consultation on financial inclusion (April 2009)
• Submission by the European Network of Credit Unions to the European Commission consultation on setting up basic payment accounts (November 2010)

Financial Education

Enhancing members’ financial literacy is a crucial part of the work done by credit unions. The institutions operate on a face-to-face basis with members and thereby assist them in understanding financial terminology, products offered and the financial implications of each. Credit unions also have developed concrete programmes aimed at helping members and non-members to better understand financial services, including seminars, videos, leaflets/ brochures, and partnerships with other relevant national stakeholders. The European Network of Credit Unions is represented in European Commission consultative groups including FIN-USE and the Expert Group on Financial Education.

• Survey of financial literacy schemes in the EU (commissioned by the European Commission)
• Annex 1
• Annex 2
• Annex 3

Volunteering

Credit unions are partially run and fully governed by volunteers constituting the board of directors. In credit unions’ experience, volunteering plays a crucial role in modern society, with positive impacts not only on people’s personal lives, but also on the whole community. Credit unions therefore support and encourage European initiatives emphasising the important role of volunteers and promoting such activities further.

Credit unions letter of support of making 2011 the European Year of Volunteering

Access to payment infrastructure

Most credit unions provide payment services to their members. However, in most countries they do not have direct access to clearing and settlement infrastructure and use payment facilities indirectly through commercial banks. The lack of direct access results in avoidable costs for the credit union movement. The European Network of Credit Unions advocates direct access for credit unions to national-level clearing and settlement systems at affordable prices.

Submission by Credit Unions to the European Commission’s sector inquiry into retail financial services (October 2006)