Credit unions chief ‘confident’ no repeat of Rush debacle

Unions hopeful of providing €500m to fund social housing

 

The chief executive of the Irish League of Credit Unions, Ed Farrell, is “quietly confident” that there won’t be a repeat of events at Rush Credit Union (RCU), which was placed into liquidation recently following the emergence of a €4.7 million hole in its reserves and alleged criminal activities.

“I don’t think that if we are here this time next year that there will be any contagion,” he told The Irish Times when discussing ILCU’s results for last year.

“The credit union family would feel let down by it . . . but it will probably help them up their own game by a couple of per cent.”

Mr Farrell was satisfied that ILCU played its role in trying to save RCU from collapse by helping to facilitate a transfer to the neighbouring Progressive Credit Union. But the emergence of alleged fraud issues earlier this year following a forensic review by Grant Thornton scuppered this move.

“There is little enough anyone can do if somebody is hell bent on not running a place properly,” he said. “It was the mismanagement and the dominance of one or two people at governance that meant in the Central Bank’s eyes they couldn’t transfer it in the end.”

At the time of its liquidation, RCU had a negative reserve when it should have been holding 10 per cent of its assets. ILCU said two credit unions are currently operating below this 10 per cent level but added that they were in the process of being transferred into other credit unions, with the approval of their members and the regulator.

ILCU declined to name the two credit unions.

Mr Farrell said ILCU’s members are hopeful of providing about €500 million to a fund to provide finance to approved social housing bodies for new homes.

This initiative is being promoted by the Department of the Environment to help resolve the current shortage in housing. It would involve credit unions providing finance to a central fund that would be used by the approved housing bodies.

Government bonds

This fund would also include money from other sources and the lending would remain off balance sheet for the Government. It would be held as an investment by the credit unions, delivering them a return of about 2.5 per cent annually.

Mr Farrell said credit unions have about €10 billion in funds that are not loaned out and which they can only place on deposit with the banks or use to buy Government bonds.

“We are and have progressed work with them [the Government] and there might be €500 million and maybe up to €1 billion of our surplus funds for this to see how it might work,” he said. “The repayment of the loan is guaranteed . . . and we’re trying to work on a mechanism where it would be feasible, practical and prudent for some of that money to be used for social housing.”

ILCU’s members have provided €70 million in mortgage loans to customers, which equates to just 2 per cent of their total lending.

ILCU’s members increased their aggregate loans for the first time in years in the 12 months to the end of September. This figure rose by 6 per cent to €3.76 billion with 192 credit unions growing their loan books in the period.

Loan arrears continued to fall and are now back at September 2006 levels. Savings and assets were both up more than 7 per cent. Assets stood at €14.4 billion while savings rose to just more than €12 billion.

Capital reserves rose by 8.4 per cent to €2.32 billion while the level of excess capital increased to €880 million. The 281 credit unions affiliated to ILCU had 3.04 million members at the end of September.