Business Irish

Wednesday 13 December 2017

Fears growing for future of credit unions as 79 at risk


Charlie Weston, Personal Finance Editor

THERE are 79 credit unions regarded by the Central Bank as being at "high risk" of failing.

The registrar of credit unions in the Central Bank said in a speech last week that a number of credit unions were regarded as high risk, but did not say how many.

Regulators fear that rising arrears on members' loans and investment losses are set to make large numbers of credit unions insolvent.

Insolvent credit unions, whose assets are less than their liabilities, are likely to have to be bailed out.

Registrar of credit unions James O'Brien is now understood to have decided that 79 of the 410 credit unions in the country are at high risk of becoming insolvent.

It is understood Mr O'Brien arrived at his assessment of that around one-in-five credit unions are in trouble after stress tests were carried out by consultants Grant Thornton. Another 146 credit unions are at medium to high risk, with 139 judged to be medium to low risk.

Just 46 credit unions were regarded as low risk, according to information supplied by the registrar to the Credit Unions Managers' Association.

The number of credit unions regarded as high risk roughly correlates to the number of credit unions that have been ordered not to pay a dividend for last year, financial consultant Bill Hobbs said.

A former head of credit union body the Credit Union Development Association, Mr Hobbs said the movement lacked the leadership to deal with the crisis.

In his speech last week, registrar James O'Brien said he was concerned at the continuing sharp rise in arrears on loans in many credit unions. And investment losses were continuing to hit the sector.

He was also worried about a number of credit unions having sufficient assets to cover liabilities.

"All of these trends are pointing to the likelihood that more credit unions could be heading into financial difficulties," he told chairmen and treasurers of credit unions.

The registrar pinned the blame for failing credit unions on poor management and a lack of oversight by boards and supervisory committees.

It is understood the Central Bank fears that loan losses for credit unions could hit €1.7bn out of a total book of €7bn in a worst-case scenario.

Irish Independent

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