Thursday 23 November 2017

Credit unions report sharp fall in arrears

Ed Farrell. acting head of the Irish League of Credit Unions
Ed Farrell. acting head of the Irish League of Credit Unions
Charlie Weston

Charlie Weston

Credit unions appear to be getting back to financial health much faster than the banks.

The movement is emerging from seven years of austerity with more members, expanding savings levels, and a sharp fall in arrears, figures seen by the Irish Independent show.

But a reluctance by consumers to take out loans means total borrowings continue to fall.

Acting chief executive of the Irish League of Credit Unions (ILCU) Ed Farrell said: "Most of the indicators for credit unions are positive. Arrears keep falling and the provisioning is there so there should not be any big shocks of more credit unions getting into trouble."

He said predictions from regulators over recent years that up to 20 credit unions faced having to shut down have proved unfounded. "Credit unions are not in as bad a state as regulators were putting out," he said.

The equivalent of the capacity of Croke Park are joining credit unions every year. Total membership is now at 2.87 million. The new figures for the 365 credit unions in the Republic that are members of the ILCU show they collectively have €2bn in reserves.

Both the level of assets and the savings of the credit unions have grown, the figures for the year to last December show.

There is no evidence that the members of the credit unions that make up the league lost any confidence in their credit union and withdrew their savings over a period that has been described as the most extreme financial collapse in the Western world.

The figures show that 98pc of league credit unions meet the Central Bank requirement to have at least 10pc of their assets held in reserve.

Just 12 credit unions have yet to get to a situation where 10pc of their assets have been put aside in reserve, with three of these likely to be merged with larger credit unions and given additional funding guarantees from the league's rescue fund.

Mr Farrell said the credit unions had €2bn in reserves, €710m more than required.

However, there has been a big drop in the value of loans being taken out by members. The combined loan book of the 365 credit unions shrunk from €4.27bn in 2012, to €3.56bn last December.

Mr Farrell said consumers were still paying down debt, with demand for new lending low. Loans have traditionally been the main source of income for the movement.

Irish Independent

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