Tuesday 6 December 2016

Credit Unions' stability to be probed by Central Bank

Charlie Weston Personal Finance Editor

Published 22/02/2011 | 05:00

CREDIT unions are bracing themselves for a new set of probes by the Central Bank to check if they can withstand further loan losses as the recession continues.

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The Central Bank confirmed yesterday that all credit unions would now be subject to a loan-book review.

"A stress testing exercise of the sector will also be conducted, which will include undertaking specific work on a number of individual credit unions (with the number of individual credit unions to be determined)," the spokesman said.

This latest stress-test exercise follows a review of the sector by consultants Grant Thornton, which was put in place by the Central Bank after a request from outgoing Finance Minister Brian Lenihan.

There are some 414 credit unions in the State holding €12bn in customer deposits.

It is understood the Central Bank registrar of credit unions James O'Brien fears that loan losses for credit unions could hit €1.7bn out of a total loan book of €7bn under a worst-case scenario.

Pressure on the sector during the recession has been put into focus after it emerged that one -in-five credit unions would be unable to pay a dividend for last year to its members.

Other credit unions have been told by regulators to cut the dividend payment -- effectively the interest on accounts -- with more money to go into reserves to cover loan losses.

The Central Bank said: "This strategic review of the credit union sector will inform our actions to strengthen the prudential soundness of the sector in the interests of credit union members.

"This is a prudential report and has been provided to the Minister for Finance and Commission of the Central Bank. No decision has been taken to publish the report."


A second stage of this review had been planned but the Central Bank said the approach to the next stage of the strategic review was under consideration.

A spokeswoman for the Irish League of Credit Unions had no comment to make.

And the league has suspended a country-wide lobbying campaign of politicians ahead of the elections.

It is understood the town-hall meetings were suspended after Fine Gael agreed to include a section in its manifesto document on credit unions that has matched almost word-for-word what the league wants.

The manifesto states: "In government, we will establish a commission to review the future of the credit union movement and make recommendations in relation to the most effective regulatory structure for credit unions, taking into account their not-for-profit mandate, their volunteer ethos and community focus, while paying due regard to the need to fully protect depositors' savings and financial stability."

Labour has also made a commitment to credit unions in its manifesto.

Irish Independent

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