Multi-million euro bailout for credit union that recorded loss of €8.6m
A CREDIT union has had to get a multi-million euro bailout after recording a loss of €8.6m because loans have not been repaid.
Killorglin Credit Union in Kerry has been forced to write off nearly €3m from last year alone in loans it is unable to get repayments on. Since 2009, the total amount of loans written off has come to €6.3m.
Now, the 10,000-member credit union has had to be propped up with a multimillion euro support package from a credit union special fund.
Last night, the leading lobby group for the sector, the Irish League of Credit Unions, insisted member savings were safe and that there was no danger of the co-operative lender running out of money.
"Members' savings are safe and protected under the Government's deposit guarantee scheme, and Killorglin Credit Union will continue to operate in the local community and continue to serve its members," a spokesman said.
An annual general meeting has not been held for two years, and no dividend was paid for 2010 or for last year, and no rebate has been paid on interest on loans.
However, a notice of the accounts sent to members shows that an AGM will now be held on Monday.
A copy of the credit union's accounts, seen by the Irish Independent, shows that in 2010 there was a deficit of €8.6m before a rescue deal was agreed from a fund run by the Irish League of Credit Unions.
The accounts state: "The deficit arose principally because of the large level of loans written off, the large increase in the bad-debt provision required against loans at September 30, 2010, and a writedown in value of €2,068,057 of the freehold premises of the credit union."
The league said, on behalf of the credit union, that a number of measures had been taken to strengthen the Kerry lender.
"Like most other financial institutions in the current recession, Killorglin Credit Union has faced some challenges, many of which are historical in nature.
"However, Killorglin Credit Union has taken a number of decisions and implemented a number of measures to deal with their position and strengthen the credit union into the future."
There have been 28 credit unions bailed out by the league's savings protection scheme fund. This has meant that €66m of the €80m fund has been spent.
Loan arrears at the State's 407 credit unions have risen to €1bn in total, according a Government-appointed commission. This is almost triple the level of arrears in 2006.
The Credit Union Commission, which reported earlier this year, found that 27 unnamed credit unions were in serious need of capital.
The Government has set aside €250m this year and the same again next year to be pumped into struggling credit unions.
Many weaker credit unions are being encouraged by the Central Bank to merge with stronger ones.