The Irish League of Credit Unions (ILCU) has today confirmed it is in talks with the Central Bank over the future of the sector.

In a statement issued today, the ILCU, which represents 498 members, said initial discussions aimed at supporting the credit union movement were progressing.

It said the purpose of current talks was focused on the introduction of a statutory resolution regime for the credit union sector.

"Discussions with Central Bank have been constructive and purposeful with a shared intent to ensure that the future of credit unions can be assured and supported," said the ICLU's president Mark Bailey.

Concern has been raised about the financial health of many credit unions over the past few years. Despite avoiding many of the problems experienced by the banks many credit unions are facing difficult times as the Financial Regulator is planning to force them to set aside more in reserve to protect against losses on loans that borrowers are struggling to repay. In addition, some credit unions lent aggressively during the credit binge and are now struggling during the downturn.

According to the ICLU's annual report, which was published last month, 2010 was a difficult year for credit unions with increased bad debts and provisioning. This comes despite a rise in the number of members it has to 2.98 million across the Island of Ireland.

The Central Bank said today that it was important that a strong and robust regulatory framework be put in place to support the credit union movement.

Earlier this month, a senior Central Bank official said that major consolidation within the sector was needed in order to ensure its survival.

Speaking at a conference organised by the Financial Services Innovation Centre at University College Cork, Jonathan McMahon, director of the credit instituions at the Central Bank, said that major consolidation could lead to the credit union becoming a major player in the Irish financial sector.