New laws to impact on credit union dividends
NEW legislation could have the unintended consequence of reducing future income streams for some credit unions and will undoubtedly impact on dividend payments to members in the coming years, the head of a leading credit union has said.
Mick Dillon, chief executive of Athlone Credit Union, broadly welcomed the legislation, but said it came at a price in terms of credit unions having to set aside more funds to meet increased liquidity demands as proposed by the Financial Regulator.
Mr Dillon also warned about the financial implications of the higher level of reserves now being set aside to cover doubtful loans, arising from changes in the reporting and accounting treatment of loans which had to be rescheduled.
"In reality, the extension of the longer-term lending limits effectively provides a quick 'get- out-of-jail' card to those credit unions currently in breach of the act but perhaps at a price in the long run," he said.
Finance Minister Brian Lenihan recently announced the extension of longer-term lending limits for credit unions. This new legislation is intended to allow credit unions to assist members experiencing financial difficulties by lengthening their loan schedule.
"The message is clear for borrowers who experience difficulties -- communicate directly and early with their credit union," Mr Dillon said.