Credit unions in Northern Ireland are subject to a unique combination of statutoryoversight and self-regulation. This paper investigates the association betweenprudence and the monitoring of financial ratios by credit union trade associations.We find that compliance with the mandated level of capital reserves is uniformlyhigh, regardless of the existence or extent of self-regulation. However, aftercontrolling for cross sectional differences in profitability, age, size, growth andcommon bond type a positive association exists between self-regulation andfinancial ratios measuring prudence and loan book quality. These findings havepolicy implications for the regulation of credit unions in Northern Ireland andelsewhere regarding potential regulatory cost savings from reliance on selfregulationprovided by trade associations.
- credit unions