Sunday 21 January 2018

20 unions 'failing on reserves'

Eamon Gilmore described Newbridge as an 'exceptional case'
Eamon Gilmore described Newbridge as an 'exceptional case'

About one in 20 credit unions are not meeting the funding requirements set out by regulators.

While members of Newbridge Credit Union were left reeling following its shock 54 million euro bailout, it has emerged that 20 of the nation's 392 local lenders are in trouble.

The Central Bank confirmed it is working closely with a number of credit unions on an ongoing basis to address their financial issues.

"Any actions we would take are in the best interest of members and their savings," a spokeswoman said.

While 20 credit unions to date have reported regulatory reserves below the minimum requirement of 10% of assets, a total of 100 are experiencing at least some level of difficulty with their balance sheets.

It is understood the regulator is working through a portfolio of these local lenders on a case-by-case basis.

But rather than failing to meet the minimum requirement of reserves, these credit unions are thought to be experiencing difficulties of a less severe nature, such as governance issues or poor lending decisions.

It is understood there is a shortfall of about 11 million euro in the credit unions.

A pot of 500m euro has been set aside by the Central Bank to cover any significant losses at the community-based lenders.

Tanaiste Eamon Gilmore said that shortfall must be seen in context of the pot available to cover losses.

He insisted the transfer of Newbridge customers to Permanent TSB in an unprecedented 54 million euro bailout was necessary to protect their savings.

Mr Gilmore described Newbridge as an "exceptional case".

He pointed out that the average loan issued by credit unions across the country was 7,764 euro.

But at Newbridge, there was one loan of 3.2 million euro and around 26 loans on average worth 550,000 euro.

The Tanaiste said other options to save the debt-hit local lender were considered, such as amalgamating it with another credit union.

Naas Credit Union rejected the idea.

The route taken was seen to be the best course of action, he said.

Regulators have insisted that all deposits under 100,000 euro were guaranteed under the bank guarantee scheme.

Fresh from talks about Newbridge at this week's Cabinet meeting, Mr Gilmore also insisted the Government supports the credit union movement.

"The credit union movement in this country has provided great support to people," Mr Gilmore said.

"They operate on an ethos and a not-for-profit ethos. They operate on the basis of solidarity.

"I want to say to you directly, the Government continues to support the credit union movement."

The Central Bank reported no major run on deposits yesterday as members and clients of Newbridge protested at the front doors after opening.

Permanent TSB has moved to reassure customers that existing terms and conditions on accounts and borrowings will apply.

There are about 32,000 deposit accounts in Newbridge and 7,000 loan accounts, making it one of the largest in the country.

The Central Bank said that the business had liabilities over assets of eight million euro and was in breach of its requirement to maintain a regulatory reserve ratio of 10%. It described the balance sheet as insolvent.

The Irish League of Credit Unions will publish its forecast for final returns for the movement in coming weeks, but in response to the bailout of Newbridge - which is not affiliated to the organisation, it claimed figures will show they are in a strong financial position.

Press Association

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