Howth Sutton Credit Union was in financial difficulty for some time

Just hours after the High Court approved the transfer of Howth Sutton Credit Union to Progressive Credit Union, two workmen were busy changing the sign outside the front door.

Chief executive of the Irish League of Credit Unions Kieran Brennan said “the fall in property values on this small credit union was just too much”.

Established in 1964, the north Dublin credit union relocated to 1 Main Street, Howth, in 2008 at a cost of €3.5 million. But tumbling property prices since then meant the market value of the premises fell significantly lower than its carrying value in the union’s accounts. As of September 30th, 2013, the value of the new premises was €600,000.

This decline damaged the credit union’s regulatory reserve ratio (defined as the amount held in total regulatory reserve of a credit union as a percentage of its total assets). Under law, credit unions are required to maintain this ratio at no less than 10 per cent, but by September 30th, 2013, the ratio for Howth Sutton Credit Union stood at -32.3 per cent.

Since 2009, the credit union also had to contend with a loan book which declined from €5.7 million to €2.4 million; an increase in gross loans greater than nine weeks in arrears from 9.6 per cent to 30 per cent as well as an increase in the bad debt provisioning requirement from €0.3 million to €0.6 million.

As per the draft audited financial statements for the year ended September 30th, 2013, the credit union had a net liability position of €1.6 million and required €2.3 million in additional capital to meet the 10 per cent regulatory reserve ratio requirement.

Sought to effect transfer
In a statement yesterday, the Irish League of Credit Unions said Howth Sutton Credit Union has, for some time, sought to bring about its transfer to another credit union.

In Howth many locals were unaware of the High Court order and those that were seemed ambivalent.

“I would have preferred if it could have stayed the way it was,” said one of its 3,012 members. “It has been there for a long time. A lot of local people have used it for loans over the years.”