Is my credit union in trouble?
THE takeover by a bank of the savings and loans of Newbridge Credit Union has rattled people around the country.
There are 2.8 million members of 392 credit unions.
So how do you know if your credit union is strong enough to withstand the ill winds of the financial turmoil that continues to buffet the economy?
Here are some answers:
Q I have €20,000 in my local credit union. Are my savings at risk?
Credit union members' savings are protected under the government deposit guarantee scheme of up to €100,000 per depositor.
Remember, that even with the action taken in Newbridge, not a cent of savers' money has been lost.
Q How would I know if my credit union was in trouble?
There are five key questions you need to ask the manager and/or board of your credit union:
* Has the board has been told by the Central Bank to postpone the annual general meeting? If it has, it is a sure sign the regulator is unhappy with the way the lender is being run.
* Will a dividend be paid this year, and was one paid last year? Credit unions that are reporting losses are being barred from paying a dividend by regulators.
* Have the Central Bank regulators imposed loan restrictions on the credit union? And exactly how severe is that restriction? It is worth noting that close to 300 credit unions have now been ordered by regulators to restrict their lending to consumers.
* Are loan arrears rising? And how many loans are three months, six months or nine months in arrears? Rising arrears are a sign of trouble ahead.
* How much money has been put aside to cover loans that are unlikely to be repaid? The level of what is called provisioning, compared with previous years, should tell you how healthy the credit union is now.
Q Will other credit unions end up being taken over by banks?
The Central Bank, which regulates the sector, is not ruling that out, but it stressed that the Newbridge situation was a one-off. There was a particular problem with developer loans at the Kildare lender.
Q Will all credit unions survive?
The Government has set aside €500m to fund mass merges in the sector.
There are currently 392 individually owned and run credit unions. The Government and the Central Bank would like to see a large chunk of them voluntarily merge to make them stronger.