Credit union gets bailout of €4.3m as bad debts mount
A CREDIT union has had to be given access to €4.3m from a bailout fund after a spike in bad debt provisions, it has been confirmed.
Charleville Credit Union in Co Cork has been provided with the guarantee, with the money to be given to it if some of its loans are not recovered within two years.
A deficit of €5.5m was recorded after the union was forced to put aside extra provisions for bad debts, due to the severe drop in the value of properties which loans were secured against.
Stripping out the provisions, an operating surplus of €828,629 was recorded for the year up to September 2009.
A spokeswoman for the registrar of credit unions, which is part of the Central Bank, confirmed that assistance was given to Charleville but stressed that members' funds were safe.
It is understood that officials from the registrar's office have been closely monitoring credit unions.
The guarantee was provided out of the €125m savings protection scheme (SPS) run by the Irish League of Credit Unions.
Members were told at Charleville's annual general meeting in July that no dividend would be paid for last year, with a dividend payment unlikely this year also. A dividend is the equivalent of interest paid on a deposit account.
The annual meeting was told that the board of the credit union has employed the services of a debt collection agency to collect outstanding loans.
The level of savings fell last year by €7.5m, to €61m, while loans granted to members fell by €13m to €13.3m. This put pressure on its income, according to statement provided to this newspaper.
Charleville Credit Union said in the statement that "a guarantee from the Irish League of Credit Unions effectively makes €4.3m available for draw down, should it ever be needed, to replace the reserves we might lose in the event that debts are not recoverable."
Both the league and the registrar confirmed that member savings were protected up to €100,000 per head as part of the State deposit guarantee scheme.
The league spokeswoman pointed out: "Charleville Credit Union Ltd is turning in a strong performance for 2010 and could deliver a surplus."
This is the second credit union that has had to access the league's savings protection scheme, the Irish Independent can confirm.
Roscrea Credit Union insisted that savings were guaranteed up to €100,000 for each member under the State's deposit guarantee scheme after its accounts showed it has been forced to avail of a pledge of €3m from the league's savings-protection fund (SPS).
The SPS is owned and managed by the league as a centrally managed fund to support credit unions with funding difficulties.
The registrar has proposed having a statutory support fund, that would be available to those credit unions that are not members of the League of Credit Unions.