Q&A: Credit unions scandal
Q& A: Credit Unions scandal
Q: Is my money safe?
A: Yes, one hundred thousand times, yes. This is because all accounts in credit unions are covered by the Deposit Guarantee Scheme, which is a permanent scheme set up by law and operated by the Central Bank of Ireland.
If there is any major problem with your credit union, your account money will be paid to you up to a maximum of €100,000. All credit unions are part of the scheme.
Q: So what is this SPS then?
A: The Savings Protection Scheme (SPS) was set up in 1989 by credit unions affiliated to the Irish League of Credit Unions, the largest representative body for the movement.
The SPS pre-dates the State’s deposit guarantee scheme, and was designed to protect the savings of credit union members.
It is supposed to do this by providing funding and other assistance to credit unions in financial difficulties.
Credit unions that are members of the league pay a combined €8m into the SPS fund every year.
The SPS currently has €80.4m in uncommitted funds on its balance sheet, according to a review carried out by accountancy specialists Mazars.
Some €84.9m has been guaranteed to 48 credit unions since the SPS was set up 26 years ago, and €46.6m of this has been drawn down.
In the last two years alone, some €61m has been granted to credit unions, Mazars found.
Q: Has the Central Bank not got plans for a new rescue fund?
A: Credit unions already pay into a “resolution fund” that is in place should one of them face collapse. Banks also pay this levy.
But there are plans for the Central Bank to set up a separate rescue fund, similar to the SPS but not owned by credit unions.
This is about six to nine months away, and when it comes into operation it is likely to make credit unions re-examine the value of paying into the SPS fund.
Q: What did the Mazars report into the SPS find?
A: The report by Mazars found a litany of poor governance, mismanagement of the SPS fund, breaches of its rules and poor oversight.
Some €13m of credit union money was put at risk because of the way the rescue funds were used, the report says.
It is the biggest financial scandal to hit the credit union sector since it lost millions of
euro on a failed IT system in 2000.
There have been other scandals, but nothing like those suffered by the banks.
Q: What should be done now?
A: There needs to be a root-and-branch overhaul of how the League of Credit Unions works, and how it operates the SPS fund.
The board of the league needs to implement the 13 recommendations made by Mazars to improve the management and the governance of the SPS.
These issues are likely to dominate the agenda at this weekend’s annual general meeting of the League of Credit Unions in Killarney, Co Kerry, where members will want answers.