Credit unions seek support as 20 branches in trouble
TWENTY credit unions have now sought support from an emergency fund put in place to bail out troubled credit unions.
The Irish League of Credit Unions, the largest representative body for the sector, has had to put aside €48m in its accounts to cover guarantees it has been forced to give struggling member unions.
Now the league is aiming to slap a special levy on the State's 419 credit unions to raise an additional €6m a year to boost its bailout fund, the Irish Independent has learned.
Asked if the sector would not follow the banks in seeking a state bailout, president of the league Mark Bailey said yesterday that he hoped it could avoid seeking state help by relying on its own emergency fund to help ailing member unions.
Mr Bailey insisted that credit unions were different to the banks as they had their own emergency fund, the Savings Protection Scheme (SPS), which was being used to support credit unions in financial difficulty.
The league has already been forced to set aside €48m in its 2010 accounts to cover financial commitments for 13 ailing credit unions. This has meant the value of the fund has crashed to €74m.
But since the accounts were prepared the league has been approached by another seven credit unions seeking help.
No provision has been made in the accounts to cover the demands for help from the other seven credit unions, Mr Bailey said.
He revealed that a special motion would be put to the annual general meeting of the league in Belfast next month, seeking to bolster the SPS.
Asked if the sector would need a state bailout, Mr Bailey said: "We would hope to trade out of this situation and avoid state funding."
But he admitted that the need for credit unions to pump more money into the SPS would hit dividend payments.
Last year one-in-five credit unions failed to pay a dividend, or interest, to members on their accounts. Another third paid a dividend of less than 0.5pc.
Last year the value of arrears on books of the State's credit unions rose to €660m, or almost 11pc of the value of all loans.
Mr Bailey insisted that not all of the 20 credit unions seeking support from the league's SPS needed financial support, with some seeking help on governance matters.