Monday 18 December 2017

Credit unions to fight €24m levy for guarantee scheme

Charlie Weston Personal Finance Editor

CREDIT unions will resist attempts by the regulator to charge them €24m a year to cover the cost of the €100,000 deposit guarantee which covers credit union members.

The League of Credit Unions argued yesterday that the sector has its own bailout fund, while the average savings held by members is just €4,500.

The state deposit guarantee was increased to €100,000 in 2008 at a time when the panicky customers of banks were withdrawing their funds fearing a banking collapse.

But now regulator Matthew Elderfield has said the State's 414 credit unions will be hit with a demand for €24m in premiums to cover the cost of the guarantee on their deposits of €12bn.

Credit unions have not been asked to make payments up to now, unlike banks and other financial institutions.

Mr Elderfield said: "Credit unions actually need to start paying their premiums for the guarantee fund, that's not started yet.

"The credit unions have not yet been billed for their participation in the deposit guarantee fund, so they receive the benefits of that but they have not yet had a charge for it," he said.

There is close to €12bn on deposit in the 414 credit unions in Ireland and the premium payable is 0.2pc of eligible deposits. This works out at €24m, or a minimum of €25,400 per credit union.

However, chief executive of the Irish League of Credit Unions, Kieron Brennan, said the guarantee was put in place to stop a run on banks. The deposit guarantee had to be extended to credit unions to stop them being at a competitive disadvantage to banks.

"We did not actually ask for the deposit guarantee, which is not to say that we are not grateful for it. But if credit unions had been left out it would have put us at a serious disadvantage," he said.

"The average savings in a credit union are €4,500, but the deposit guarantee is for €100,000. The banks needed €100,000 but we are not necessarily in the same boat."

Mr Brennan stressed that the league, the largest representative body for credit unions, had a €125m bailout fund, the Special Protection Scheme fund (SPS).

If banks had a similar fund they would not be in the trouble they were in now, Mr Brennan added. He stressed that credit unions had, on average, just 47pc of their deposits lent out, compared with multiples of that figure for banks.

Mr Elderfield said he had concerns about the SPS for credit unions run by the league.

The regulator is anxious to establish the SPS on a statutory footing and make it available to all credit unions, whether they are members of the league or not.

Irish Independent

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