Tuesday 12 December 2017

Regulators keep close watch on 100 credit unions

Charlie Weston Personal Finance Editor

WORRIED regulators have 100 credit unions under close supervision over fears about rising loan arrears.

This is a quarter of the number of credit unions in the state.

Thousands of loans at the affected credit unions are not being repaid, putting huge financial pressure on the balance sheets.

The locally owned lenders are so short of funds they are unable to put sufficient money aside in the event that these loans do not get repaid, the Irish Independent has learnt.

And some 40 of the credit unions under close watch by the Central Bank have had to be bailed out by a special fund run by the credit unions themselves.

This is double the last reported figure for the numbers bailed out by the Irish League of Credit Unions emergency fund, the savings protection fund.

There are now 399 credit unions in the State, which means one in four is now in trouble.

Each credit union is owned and operated individually.

Regulators in the Central Bank are demanding regular financial reports from the troubled credit unions, putting restrictions on the amount of loans they can give out, and telling them not to pay dividends to members.

Some €1bn worth of loans across the credit union sector are in arrears -- defined as payments behind 10 weeks or more. Now the plan is to merge failing credit unions with stronger ones, while the State has set aside €500m to beef up the funds of weaker players.

A new body, headed by a Canadian veteran of the movement, has been put in place to ensure that the merger process is handled properly over the next four years.

It is expected that the new body, ReBo, could end up presiding over the merger of hundreds of credit unions, leaving as few as 100.

Losses

Last week the League of Credit Unions claimed that arrears had stabilised in the sector and losses were reducing.

But this is contradicted by the latest information from officials.

But the league did admit that lending had collapsed by 10pc as members stopped borrowing over fears they would not be able to make the repayments.

Yesterday, the regulator for the sector, James O'Brien, locked horns with the league over new laws that will ban people who do voluntary work in credit unions, and their families, from joining the boards.

He told a credit union event in Limerick that many boards were not up to the job of minding members' money.

There is some €12m in savings in the sector, with three million member accounts.

Irish Independent

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