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Saturday 23 September 2017

Black hole of €11m threatens 20 credit unions

Newbridge Credit Union
Newbridge Credit Union

Charlie Weston and Fionnan Sheahan

A BLACK hole of €11m exists in 20 credit unions in financial difficulty.

The revelations came as it emerged depositors in Newbridge Credit Union would have lost €1.1m in unprotected savings if it had not been taken over.

Tanaiste Eamon Gilmore confirmed 100 of the 392 credit unions in the country were being examined by the Central Bank on a case-by-case basis.

He also confirmed yesterday that not enough funding has been set aside in 20 other credit unions to cover loans not being repaid.

Mr Gilmore said 20 credit unions have reserves below the regulatory capital ratio of 10pc. He said the capital shortfall from those 20 credit unions is €11m.

Meanwhile, the directors of the former Newbridge Credit Union are to go to court to try and get the transfer of loans and savings to Permanent TSB reversed.

But Mr Gilmore said the assets and liabilities of Newbridge Credit Union had to be transferred to Permanent TSB.

"Without the transfer to Permanent TSB, Newbridge would have been liquidated," he said.

Mr Gilmore said this would have resulted in a "loss of €1.1m in unprotected savings".

The savings of individual depositors are covered up to a limit of €100,000. However, there was over €1m lodged in individual accounts above the €100,000 limit.

The Newbridge Credit Union office building is expected to "come into play" once Permanent TSB decides how to deal with its assets and liabilities.

"Clearly the building is the major asset," a government spokesman said.

Mr Gilmore said €500m has been set aside in two funds for the credit union sector and that €53.9m will be injected into Newbridge Credit Union.

This is made up of €23m cash up front to fill the black hole in deposits; €4.35m for restructuring and integration; €2m in other liabilities; and a risk share, where the State will absorb part of the losses on loans, which would need €24.7m if it had to be met now.

Mr Gilmore pointed out Newbridge Credit Union had one loan of €3.2m, 26 loans over €550,000 and 52pc of the loans exceeded the five-year repayment schedule – well above the norm.

Finance Minister Michael Noonan also briefed the Cabinet on the takeover of Newbridge Credit Union by Permanent TSB.

Late last Sunday night the bust credit union was effectively wound up and its savings and loans moved to the bank.

The High Court was told the credit union was insolvent and there was an immediate need to transfer its operations to the bank to avoid a run on deposits.

Now the former directors of the board have insisted they have "done no wrong in the case of Newbridge Credit Union".

The board, which was chaired by Ben Donnelly, said they have no option but to seek to get the High Court to reverse its decision to transfer the operations of the credit union to the bank.

LENDING

The claim that the board did no wrong comes despite the Central Bank insisting there had been a history of issues at the credit union which had a lot of "atypical lending".

It had a large number of big loans to developers – the type of lending that credit unions are not supposed to engage in.

But the directors have insisted: "The large loans referred to do not in themselves contribute significantly to the problems at Newbridge Credit Union.

"It was the intervention of the Central Bank, at a time when it was proving difficult for members to survive and fulfil their commitment to the credit union."

The statement maintained that the loan book of the lender continued to generate income in the past two years.

David McWilliams: We can't afford to lose our credit unions

Irish Independent

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