Credit union members warned of AGM delays
Published 01/12/2016 | 02:30
CREDIT union members have been warned that many of the community lenders will be unable to hold annual general meetings as usual before Christmas.
This will also delay any payment of dividends.
The delay is due to changes to accounting standards and a backlog in the Central Bank, which reviews the annual accounts of the lenders.
Credit unions traditionally hold annual general meetings in December to get members to approve the accounts, and agree on a dividend payment.
Credit union members with share accounts are part owners of the institution. This means their savings are actually shares, and the interest paid is a dividend, if there is a surplus.
However, dividend payments at most of the State's 315 credit unions are likely to be delayed this year.
Some three million people are members of credit unions across the country.
The delay is due to the application of accounting standard FRS102a, which means credit unions have to make what one auditor called "unprecedented changes" to how they report their financial accounts.
The new standard also requires credit unions to restate accounts for 2014 and 2105.
Draft audited accounts have to be filed to the registrar in the Central Bank, with a huge backlog of accounts understood to be awaiting approval from regulators.
And in a reversal of policies previously recommended by the Central Bank, credit unions that had built up large bad-debt provisions will have to reverse these.
However, the release of some funds put aside for bad debts could mean higher dividend payments will be paid out by credit unions this year.
One auditor of credit unions said it used to take the Central Bank two days to review accounts. It is now taking weeks.
"The increased process of checking by the Central Bank is adding to the already aggravated delay in meeting all the new requirements," the auditor said.
This means that AGMs have been pushed back by up to a month.
A delayed AGM is often a sign that a credit union is in a financially-distressed state, as regulators don't allow an institution with financial problems to hold its annual meeting.
The delays have meant some credit union members have mistakenly assumed their community lender is in trouble.
Bust Rush Credit Union had not been allowed by the registrar of credit unions in the Central Bank, Anne Marie McKiernan, to hold an annual general meeting since 2013.
A Central Bank spokeswoman said it does not approve credit union accounts. It checks them to ensure that any dividend payments do not impact on regulatory reserves.
She added that credit unions were warned by it in September that the new accountancy rules would add complexity, and delay its review process.
An Irish League of Credit Unions spokeswoman said the new accounting rules were causing some delays.
Asked how many of its member credit unions would pay a dividend this year, she added: "We would expect that most credit unions will aim to pay a small dividend this year."
In recent years, many credit unions have paid a loan interest rebate instead of a high dividend in order to reward borrowers as well as savers.
But credit unions were being careful, the spokeswoman said.
"Even though the initial signs of recovery are clear, it is only right that every credit union continues to make responsible and prudent decisions."
The league said that given that market interest rates for savings are low, there is economic uncertainty regarding Brexit, and that credit unions savings have been growing, credit unions do not expect a dramatic increase in the average dividend rate to be paid.
Anne Marie McKiernan