COVID-19 has presented significant challenges for Credit Unions.
The major issues are declining loan demand, an increase in credit control considerations and other operational matters such as HR, Liquidity and Capital management.
We set out below 6 main areas of focus by Credit Unions during this unprecedented period and some areas for consideration under each.
- Credit policy needs revision to cover the practical scenarios of dealing with members applying for emergency loans due to the pandemic
- Keep a focus on new lending
- Consider a COVID type emergency loan with quick turnaround; or top ups
- Online marketing – members have time on their hands – focused marketing campaigns
- Make the application process easy – move it online, speed up the turnaround time and have clear lending criteria
- Communicate, communicate, communicate with clients to let them know what is happening and what you can do for them
2. Credit Control Matters
- Credit Control policy needs revision to cover the practical scenarios of dealing with members applying for emergency loans due to the pandemic and those unable to meet existing repayments and looking for temporary relief
- Options for Credit Control issues include:
- Complete repayment moratorium;
- Reduced repayment;
- Interest only payments;
- Formal reschedule;
- Share to loan transfers
- Interest only repayments seem the most favorable as the Credit Union still has monthly income and there is no need for a new loan agreement but it depends on member needs
- What has to be reported to CCR needs clarification
- Identify your “at risk” clients using tools like CU insights and communicate with them individually to address their specific needs.
- Consider the adequacy of resources within the Credit Control function to deal with increased member enquiries
- Review and update the provisioning policy to deal with increased level of enquiries and ensure that adequate provision is made for bad debts in the monthly management accounts.
- Appoint a COVID 19 Taskforce Committee, which meets daily to monitor HSE guidelines, operations, KPI’s, HR, Technology, and physical office. This committee needs to have full decision making powers allowing them to respond to the changing situation
- Adhere to all HSE guidelines on social distancing, hygiene, cleaning & isolation rules
- Put a concerted focus on getting all members to register online and reduce the need for members to physically come in to the office
- Utilise technology to minimize disruption to members and maximize the amount of work that can be done remotely such as marketing and lending, credit control, finance, regulatory functions
- Communicate to members – focusing on online services
- Maintain a business as usual objective
- Review and update HR policies around remote working, use of conferencing facilities, maintaining appropriate member confidentiality and data protection and ensuring that there is appropriate communication with the office.
- Consider Health & Safety aspects for staff working in the office; i.e. physical distancing, staggered breaks, rotation of back office and counter staff. Ensure that there is an adequate risk assessment of the working environment completed.
- Consider key person dependency and splitting the management team so that normal operations can continue in the worse case scenario
- Communicate, communicate, communicate – would expect communications to staff to be done two/three times a week outlining various changes being made, response to HSE guidelines, remote working, member service changes etc. Increased empathy and support required with staff at this very anxious time and creating a team spirit to dealing with this pandemic
- Apply for the wage subsidy if the projected income is due to fall by more than 25%
- Consider the need to get professional HR support
5. Governance & Regulatory Functions
- Board and other committee meetings must continue to be held – ideally by video conferencing and with reduced agendas focusing mainly on the COVID 19 pandemic
- Delegated decision making to Executive/Task force giving them the agility to react quickly, keep business going, and adhere to HSE guidelines
- Risk function to identify new risks as a result of the pandemic in the areas of Lending, Credit Control, Operations, Governance, Investments and Liquidity and identify the related mitigating controls.
- Test plans for Internal Audit, Risk and Compliance should change to ensure there is a more focused approach on matters arising from the pandemic
- Review and update the Risk Appetite Statement as there is likely to be a change to this arising from the pandemic
6. Liquidity, Viability & Reserves Management
- Complete a projected P&L to end of year and assess your viability
- Look at costs - Branch closures; wages; applying for wages subsidy scheme; overheads
- Keep focus on new lending
- Monitor Liquidity requirements daily
- Review and update the reserve management policy to deal with the use of reserves in the pandemic period.
This is an evolving situation. Credit Unions have been identified as an essential service and it is important to adopt a Business as Usual approach. However, this needs to be done within the HSE and other best practice guidelines and while maintaining appropriate governance and oversight.
For more information on any of the above, if you would like to talk to our Credit Union team or if you have any queries, we would be happy to hear from you.
Colm O'Grady - Audit & Business Advisory Partner
Ronan Kilbane - Audit & Business Advisory Partner
Michelle O'Donoghue - Audit & Business Advisory Director
Aine Dunne - HR Consultant