Warning: 27 Credit Unions face financial difficulties
Twenty-seven credit unions around the country are in serious financial difficulties and that number will soar in the coming months, it has been warned.
An expert group set up to advise the government on the problems facing the credit union movement has backed recapitalisation of the struggling lenders.
Its interim report found that 56 branches were below their minimum funding requirements while 27 were deemed to be "seriously undercapitalised".
Furthermore, the Commission on Credit Unions said that "in the absence of corrective action by the Central Bank and the credit unions, the financial position of a significant number of credit unions will deteriorate markedly between now and 2013, due mainly to rising bad debts, poor governance and inadequate buffers of reserves".
The group was set up at the start of the summer to advise the Government on the growing crisis at credit unions ahead of legislation to be drawn up by the end of the year.
It has recommended:
:: A stabilisation programme and fund for credit unions in difficulty but which are deemed "viable" by the Central Bank;
:: Capitalisation, technical and financial advice as well as an overhaul of how branches are run;
:: Branches in difficulty be handed deadlines to get their house in order or face measures under stricter banking laws brought in under the EU/IMF bailout deal.
It has also called for deposits at credit unions to remain covered under the State banking guarantee scheme.
"While the financial challenges faced by individual credit unions and the credit union sector are evident, they are not impossible to overcome," the report states.
"However, the challenges highlighted in this report point to a clear need to reform how credit unions are governed and regulated.
"A strengthened and re-vitalised sector can be in a position to play an increasing role in the retail financial landscape."
The group is to hand its final report to Finance Minister Michael Noonan by next March.
Last week, Mr Noonan said he would be prepared to pour up to one billion euro of taxpayers' money into struggling credit unions.