Vigilance and Resilience - Strengthening Credit Unions in a Changing Landscape - Remarks by Domhnall Cullinan at ILCU Annual Conference

Good morning.

Brendan, thank you for the warm introduction.

It is a pleasure to join you at the ILCU Internal Audit Services Conference. I also want to thank Barry Harrington for the invitation to address you here today.¹

When I addressed the ILCU Annual Conference last April, I spoke about a time of transformative change for credit unions, a period that would bring both significant opportunities and important challenges.²

One year on, we can see that transformation taking shape. A revised and simplified lending framework is now in effect providing credit unions with expanded capacity to serve members. Assets and lending continue to grow. Reserves remain strong. The sector is consolidating and evolving, with positive momentum evident across several key metrics.

Yet the risks that were highlighted then have not gone away. In fact, in some areas, particularly the external macro-environment and operational resilience, they have intensified.  Peter Drucker once observed that “the greatest danger in times of turbulence is not the turbulence, it is to act with yesterday's logic”. That is why today I want to focus on the theme of vigilance and resilience, how we protect and enhance the progress that has been made and fulfil the Bank’s vision of “strong credit unions in safe hands”.

But before I outline what I want to cover today, let me say something about how we approach our work with the credit union sector. The Central Bank is committed to being open and engaged with those we regulate and supervise. This approach supports us in our work and to effectively deliver outcomes-focused regulation and supervision.³ Earlier this year, the Registry of Credit Unions published a Credit Union Engagement Charter, setting out the principles that guide our interactions with the sector.⁴ Our commitment remains clear: our engagement will be open, robust, constructive, and transparent. In this engagement, the Bank will focus on the most material risks, recognising that our shared objective is strong credit unions serving members effectively over the long term.

My remarks today will address three areas:

First, the risk environment - the uncertainties and transformations facing the financial system, what they mean for credit unions, and our supervisory priorities as shaped by these emerging risks.

Second, sustainable growth - balancing ambition with prudence, exploring collaborative models, and continuing our simplification efforts.

And third, operational resilience — particularly the findings from our IT Thematic Review and the actions required.

Risk Environment

As we gather today, it is important to place our discussion within the broader risk environment facing the Irish financial system. The Central Bank’s most recent Financial Stability Review5, Q1 2026 Quarterly Bulletin⁶ and the Regulatory & Supervisory Outlook 2026⁷ paint a consistent picture.

The global backdrop remains one of heightened uncertainty. Geoeconomic fragmentation, geopolitical tensions and stretched valuations in some financial markets continue to pose risks. Domestically, the Quarterly Bulletin notes that a renewed surge in international energy prices is testing economic resilience, with inflation projections revised higher for 2026 and modified domestic demand growth expected to moderate. Operational and cyber risks are assessed as remaining very high, while risks related to data, models and artificial intelligence have increased. Asset valuation and market risks have also risen relative to last year.

This rapidly evolving environment is further shaped by accelerated technological change, including the increasing use of artificial intelligence. Developments in instant payments, tokenisation and the ongoing preparations for the Digital Euro form part of the technology-driven transformations highlighted in the Outlook. A Digital Euro would aim to complement existing payment options and cash, providing greater choice while preserving the stabilising role of public money and maintaining trust in the financial system. The Savings and Investments Union initiative is also seeking to better channel savings into productive investments across Europe, an endeavour which will require the sustained efforts of multiple stakeholders⁸, and that includes a role for credit unions. For the sector, these wide-ranging changes underscore the importance of forward-looking strategic planning and robust operational resilience.

While the overall financial system, including credit unions, has demonstrated resilience through recent turbulence, there is no room for complacency. Risks that once seemed remote are now more probable, and the pace of technological and geopolitical change demands sustained vigilance.

Supervisory Priorities

Against this setting, the Regulatory & Supervisory Outlook 2026 sets out five supervisory overarching priorities for the Central Bank:

Priority 1: Maintaining and building resilience to geopolitical risks and macro-financial uncertainties involving work on operational resilience, cyber security and financial resilience in the face of a volatile macro-environment and how firms are embedding climate and environmental factors into risk management, business models and governance.

Priority 2: Securing consumer and investor interests in a rapidly changing world with a particular focus on a) how firms operate and the customer experience, b) digitalisation, including balancing the benefits of innovation with risks of harm to consumers, and c) financial crime, with rising risks to consumers from frauds and scams.

Priority 3: Responding to technology-driven transformations with a focus on the expanding use of AI, digital money and tokenisation, including our regulation and supervision of the use of these technologies and innovations, and the implications of these changes for firms and the financial system.

Priority 4: Helping to address the environmental and societal transitions underway. Given the impact of these longer-term structural transitions, we will continue to work in partnership with other stakeholders to help address them. This includes work on protection gaps, retail investment participation, the evolving payments landscape and sustainable finance.

Priority 5: Enhancing how we regulate and supervise with a continued focus on evolving our supervisory approach to ensure its continuing effectiveness, improvements to gatekeeping and the roadmap for delivering on simplification as set out in our recent "Regulating and Supervising Well" publication.⁹

A central theme that runs throughout these five priorities is transformation and change, with a need for all participants in the financial ecosystem to adapt to the risks and impact of this change. For the credit union sector specifically, the Outlook highlights that recent legislative and regulatory changes are facilitating growth and diversification. This growth must be matched by a corresponding maturation in operational, organisational and risk management capabilities. Supervisory focus in 2026 will therefore centre on financial resilience (including reserves and liquidity), the development of a coordinated approach to sustainable growth, managing operational risk and continued strengthening of governance and culture within credit unions.

Continued Growth and Resilience

Looking at the sector today, Irish credit unions continue to maintain financial resilience while playing an important role in the provision of financial services. With close to 3.6 million reported members and total assets of approximately €22.5 billion at the end of September 2025, credit unions remain deeply embedded in communities across the island.

The latest Financial Conditions of Credit Unions Report¹⁰ shows positive indicators: assets grew by 5%, member savings rose by 5% to €18.7 billion, and gross loans outstanding increased by 8% to €7.7 billion. Mortgage lending continues to expand, with the house loan book now approaching €900 million, and new lending issued during the year reached €3.3 billion. Arrears levels remain low and capital reserves are robust, with average realised reserves at 16.8%, well above the regulatory minimum.

These outcomes are encouraging. They reflect a stable sector that is responding to member needs for affordable home finance, support for small businesses and everyday lending. At the same time, it is important to recognise that this resilience is not static and challenges remain; for example, a central purpose for a credit union is to provide credit to its members. A sectoral loan-to-asset ratio of 34% shows a sustained imbalance between the savings accepted and loans provided. This metric highlights the importance of ongoing focus on strategic planning and business model sustainability.

Robust Resilience Through Strong Regulation and Supervision

The credit union sector's resilience today did not come about by chance; it reflects prudent, deliberate choices, and sustained effort. This strength has been built upon three mutually reinforcing pillars:

• A robust and prudent regulatory framework, which alongside the maturity of the sector has become more proportionate, more enabling, and more focused on outcomes, creating space for credit unions to grow while maintaining appropriate safeguards;
• A supervisory approach that is risk-based, forward-looking, and increasingly integrated that identifies issues early and drives remediation; and
• The commitment of credit union boards, management, and staff, including internal audit personnel, to improving standards of governance and risk management.

Taken together, these elements have supported the sector’s development to date. In the current environment, it is important that this balance is maintained. While the Bank is supportive of efforts to reduce unnecessary costs and complexity within regulation and supervision, streamlining where appropriate, such changes must not come at the expense of the resilience and protections that underpin member trust.¹⁰

Balancing Growth Ambition with Prudent Standards

Many credit unions rightly seek to grow their lending and broaden services to members. That ambition aligns with the sector’s purpose, but it must be pursued prudently and sustainably.

The expanded lending framework is enabling, not a green light for unchecked volume growth. Boards and management must ensure that growth in mortgages or business lending is underpinned by robust credit assessment, thorough affordability analysis, sound risk pricing and appropriate limits on concentrations. Growth that outpaces risk management capability would undermine the trust that is the sector’s greatest asset.

Internal audit plays an essential role by independently testing whether a credit union’s lending frameworks are operating effectively, whether exceptions are properly controlled, and whether emerging risks are identified and escalated promptly. This scrutiny helps ensure that expansion serves members over the long term rather than exposing their savings to unnecessary risk.

Collaboration Through CUSOs and Corporate Structures

One area of particular interest in supporting sustainable growth is greater collaboration across the sector through credit union service organisations (CUSOs) and, in time, corporate credit unions.

The Bank has noted with interest recent initiatives, including the establishment of a CUSO aimed at developing centralised treasury functions, improving asset and liability management, and enabling greater scale in mortgage and business lending. Such collaborative structures have the potential to deliver real benefits with enhanced efficiency, better risk diversification, access to specialised expertise, and stronger support for member services while preserving the local, community-focused nature of individual credit unions.

However, as with any expansion or new arrangement, these developments must be approached with the same rigour and prudence that has underpinned the sector’s resilience to date. Effective governance, clear risk appetite frameworks, robust oversight of shared services, and careful management of inter-dependencies will be essential.

The Central Bank will progress the development of an appropriate regulatory framework for shared service organisations during 2026, alongside the advancement of policy work on corporate credit unions. We look forward to continued engagement with the sector on these important initiatives.

Simplification and Enablement

As I mentioned earlier, the Bank is also delivering tangible simplification for the sector. Last year’s review of the Credit Union Lending Framework has enabled safe growth in house and business lending, with a simplified approach that included the removal of tiered limits, while maintaining appropriate guardrails. For 2026, we will continue to update the Credit Union Handbook and related guidance to maintain clarity and streamline processes so that they are consistent with evolving prudential expectations, reflecting a tailored and proportionate approach to regulation and supervision of credit unions.

This work, set out in our December 2025 roadmap for a more effective and efficient regulatory framework, continues our proportionate and tailored approach. It sits alongside our ongoing work to extend the full Consumer Protection Code to all regulated activities of credit unions so that members are afforded the same level of protection as all other financial service consumers.

IT and Operational Resilience – Implementing the Lessons from the Thematic Review

Operational resilience remains a priority area, particularly given the high level of operational and cyber risks highlighted in the 2026 Regulatory & Supervisory Outlook.

In 2025, the Bank completed an IT Thematic Review of IT Risk Management across the credit union sector. This review assessed IT risk management, internal controls and governance. Communications were issued to all credit unions with details of the Thematic’s findings and expected follow-up actions.

These findings, and the Bank’s focus on Operational Risk, will also not come as a surprise to today’s attendees. The Institute of Internal Auditors, which represents 260,000 professionals worldwide, published its ‘2026: Risk in Focus’ survey results that identified business resilience, digital disruption and AI as the three key risks faced by organisations worldwide.

Credit unions are expected to address the relevant identified gaps and demonstrate effective remediation by early 2027. The findings align closely with some of the requirements of the Digital Operational Resilience Act (DORA), which will apply to credit unions from January 2028. Early remediation will form part of the necessary preparations for a credit union before DORA takes effect.

Boards hold ultimate responsibility for IT risk and resilience. Senior management must drive the necessary investment in people, processes and technology. Improved operational resilience will be an ongoing journey. The Bank will continue to engage constructively with the sector on this journey. The quality and pace of remediation of issues identified in the IT Risk Thematic will be a key focus of our supervisory engagement in 2026 and beyond.

Other Areas of Focus

Our supervisory area of focus for credit unions in 2026 remain aligned with the broader Outlook: prudent implementation of the expanded lending framework, effective asset and liability management (particularly as loan books lengthen), robust governance including succession planning, and overall financial and operational resilience. More broadly, the Bank will also continue to advance its work on policy formulation and providing support to the on-going voluntary restructuring within the sector.

Today’s conference agenda touches upon and directly supports a number of these priorities, and I encourage you to draw practical, actionable insights from your discussions, and to consider how those insights can strengthen assurance work back in your own credit unions.

Conclusion – Shared Commitment to Enduring Resilience

The credit union model, member-owned, community-rooted and not-for-profit, has enduring strengths. Those strengths are best protected when regulation, supervision and internal governance work together towards safe, stable and well-managed entities that serve members effectively.

It is imperative to guard against any temptation towards complacency. The resilience the sector enjoys today is the direct result of a stronger regulatory regime, an enhanced supervisory approach and the improving efforts of credit unions themselves. Maintaining that resilience requires ongoing vigilance, disciplined risk management and an unwavering focus on member outcomes.

Regulation and supervision are not barriers to progress; they are the foundation that sustains public confidence and allows the sector to thrive over the long term. Our shared objective is clear: credit unions that are resilient, well-governed and positioned to meet the needs of members and communities for many years to come.

Lastly, to everyone working in internal audit, risk and compliance roles - the Central Bank acknowledges the demanding but vital work you undertake. Effective operation of these functions provides the independent assurance and challenge that supports boards and management in protecting member funds and ensuring the sector remains safe, stable and focused on its members.

Thank you for your attention. I wish you a productive and insightful conference.

[1] Many thanks to Marcus Sweeney and Eamon Clarke for their help preparing these remarks, and to Cian O’Laoide for his helpful comments.

[2] A time of transformative change – opportunity and challenge for credit unions - Remarks by Director of Banking and Payments Domhnall Cullinan at ILCU Annual Conference April 2025

[3] Regulating with purpose – outcomes-focused regulation and supervision, a practitioner’s perspective - Remarks by Deputy Governor McMunn at Outcomes-focused Regulation in Financial Services conference, University College Dublin (UCD) March 2026

[4] Central Bank of Ireland Registry of Credit Unions Credit Union Engagement Charter (PDF 366.06KB) January 2026

[5] Central Bank of Ireland Financial Stability Review 2025 II

[6] Central Bank of Ireland Quarterly Bulletin Q1 of 2026

[7] Central Bank of Ireland Regulatory and Supervisory Outlook 2026 (PDF 1.85MB) February 2026

[8] Opening Remarks by Governor Gabriel Makhlouf for the Savings and Investment Forum March 2026

[9] Central Bank of Ireland Regulating & Supervising well – a more effective and efficient framework (PDF 440.55KB) December 2025

[10] Central Bank of Ireland Financial Conditions of Credit Unions, 2025 (PDF 871.18KB) April 2026

[11] Through the cycle – regulation and supervision in an uncertain world - Remarks by Deputy Governor Mary-Elizabeth McMunn to Compliance Institute Annual Conference October 2025