Monday 26 February 2018

How to find out if your local lender is in financial trouble

Charlie Weston Personal Finance Editor

Q & A

THE near three million members of credit unions have been rattled by the move by Central Bank regulators to take control at Newbridge Credit Union.

Members' savings remain safe, as the state deposit scheme covers savings in credit unions up to €100,000 per depositor. But many are wondering what exactly is happening in the country's 408 credit unions.

Q: Are more credit unions likely to end up being run temporarily by regulators?

A: Unfortunately, yes. Credit unions are not immune to the financial shock the country is experiencing.

Rising loan arrears, loan defaults and rising costs are all impacting.

It is to be hoped that the move by regulators to take over at Newbridge will act as a wake-up call to other community lenders.

From now on, when regulators say they are not happy with the way a credit union is being run, managers and boards of the 408 credit unions in the State are likely to be more attentive.

Q: How would I know if my credit union was in trouble?

A: There are five key questions you need to ask the manager and/or board of your credit union:

• Has the board 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 lending 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.

• Is the loan book shrinking? A declining loan book is an indicator that income is set to fall fast at a credit union.

• 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 or otherwise the credit union now is.

Q: Are my savings safe?

A: Credit union members' savings are protected under the government deposit guarantee scheme of up to €100,000 per depositor.

Q: Can the credit union call in my loan?

A: The credit union can only demand immediate repayment of your loan if you stop paying it.

Irish Independent

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