AMENDED PROPOSALS that will give credit unions greater flexibility in implementing new minimum capital reserve levels have been issued by the industry registrar.

In April, the registrar of credit unions Brendan Logue proposed that credit unions be required to achieve a regulatory reserve ratio of 10 per cent of total assets by September 30th, to protect members’ savings against unanticipated losses.

Credit unions that failed to meet this reserve ratio would be prevented from paying dividends to their members.

Currently, one in five credit unions do not meet the 10 per cent reserve ratio.

Following a consultation process between the registrar and industry representative bodies, a revised set of proposals has been issued which will allow credit unions to phase in the new reserve ratio over a five-year period.

In addition, credit unions that report a surplus in a given year may, with the approval of the registrar, be allowed to pay a dividend, even if their regulatory reserve ratio fails to meet the 10 per cent level.

Credit unions will also be given the option to calculate their regulatory reserve ratio based on their risk profile.

This option will be available from October 1st, 2010, onwards, subject to an approval process, and will enable lower-risk credit unions to operate with a lower level of reserves.

The new proposals, which were circulated to credit unions nationwide yesterday, have been warmly welcomed by the Irish League of Credit Unions (ILCU) and the Credit Union Development Association (CUDA).

The ILCU praised the extended timetable for implementation of the regulatory reserve ratio, which it said will give credit unions greater flexibility to comply with the new regulations.