News Irish News

Tuesday 24 October 2017

Taxpayers facing €70m bill for bust credit union

The offices of Newbridge Credit Union, which has a huge hole in its accounts.
The offices of Newbridge Credit Union, which has a huge hole in its accounts.

TAXPAYERS face having to stump up €70m to plug a huge hole in the accounts at a controversial credit union.

It is the first time the extent of the deficit at the Newbridge Credit Union has emerged. Now there are fears that large losses are lurking in other credit unions.

The figure was revealed at a meeting between Finance Minister Michael Noonan and the Save Newbridge Credit Union campaign group – which is trying to keep control of the community lender and effectively lessen the blow to the taxpayer. The €70m hole is almost double the €40m it was feared would be needed to bail out the credit union.

The revelation comes as massive losses are being racked up across the credit union sector.

They are struggling to get loans repaid, and are being forced to write off huge amounts of money invested in flashy premises.

It emerged recently that loan arrears are close to €1bn across the State's 400 credit unions.

Regulators and the Department of Finance are trying to encourage up to 100 credit unions to merge into stronger groupings in a bid to shore up the sector.

A new state body called the Credit Union Restructuring Board (ReBo) has been set up to manage the combination of credit unions.

Some €250m has been set aside this year by the Department of Finance, and the same next year, to fund a mass merger of credit unions. Each credit union is separately owned and run.

Attempts to push Newbridge Credit Union into a merger with its neighbouring lender Naas have now hit the buffers. It would be the first significant merger in the sector and it had been hoped by regulators to use it as a template for other credit union link-ups.

A bitter battle for control of the Co Kildare-based lender has put the entire restructuring of the credit union sector on hold.

Newbridge Credit Union is the largest community-based lender in the State with 37,000 members.

A fight for control of the controversial credit union has been raging for a year-and-a-half now, with the Central Bank proposing it joins up with Naas Credit Union.

But the Save Newbridge campaign group is working on an alternative plan that will mean less taxpayer money is needed and an unpopular merger will be avoided, it says.

The Central Bank persuaded the High Court to appoint Luke Charleton of Ernst & Young as special manager of Newbridge Credit Union in January last year.

Now it can be revealed that the Central Bank plan to merge Newbridge and Naas will cost €70m.

DEVALUATION

The losses are due to commercial property loans not being repaid, and a massive devaluation of the new building that houses Newbridge Credit Union.

Credit union sources insisted yesterday the losses at the Kildare Credit Union were exceptional, and would not be replicated across the movement.

Savings in credit unions are state-guaranteed up to €100,000.

The campaign group in Newbridge is putting together an alternative plan that will mean less taxpayer money is needed and a merger will be avoided.

It has engaged banking consultant Greg Allen to produce a rescue that will avoid an unpopular merger.

And it has emerged that Naas Credit Union may no longer be prepared to link up with Newbridge.

A spokesman for Naas Credit Union confirmed that its directors had yet to approve the Central Bank merger plans, but would not comment on reports that the directors were backing away from the plan for the two lenders to combine.

The tie-up only has to be approved by directors of Naas, and not by its members.

It is understood there is now massive political pressure on the Central Bank to sort out the problem.

Finance Minister Michael Noonan has promised to broker a meeting between the Central Bank and the Save Newbridge CU group.

Head of the campaign group Willie Crowley said yesterday that Irish Congress of Trade Unions (ICTU) boss David Begg had agreed to chair a talks process.

Mr Crowley confirmed that his group was told by Mr Noonan the Central Bank merger plan would cost €70m.

All financial details about the credit union are subject to a gagging order from the High Court, on foot of the appointment of the special manager.

The Newbridge directors, past and present, have been told they could face three years in jail or fines of up to €100,000 if they reveal any details about Newbridge Credit Union. No accounts for the credit union have been issued since 2010.

Mr Crowley said: "We can save significant amounts of money for the taxpayer with our alternative to a merger, based on what the minister told us the merger will cost."

The Central Bank had no comment.

- Charlie Weston Personal Finance Editor

Irish Independent

Editor's Choice

Also in Irish News