Credit unions will be only institutions to pay into bailout fund

Banks were also due to pay into rescue fund before measure was overtaken by European events

The most high-profile case  involved Newbridge Credit Union where €24.1 million has been paid to date from a maximum amount of €53.9 million.. Photograph:  Colin Keegan, Collins Dublin

The most high-profile case involved Newbridge Credit Union where €24.1 million has been paid to date from a maximum amount of €53.9 million.. Photograph: Colin Keegan, Collins Dublin

 

The Department of Finance has informed the Oireachtas Public Accounts Committee that Irish banks will not now pay into a domestic special resolution fund set up in 2011 to provide bailouts to credit institutions that run into financial difficulties.

Only credit unions will contribute to the fund, which was started with a €250 million payment from the State in December 2011, according to correspondence posted on the PAC’s website.

This money was due to be repaid to the Government at a rate of €25 million a year, with the banks contributing about €18 million annually and credit unions €7 million. Domestic banks were to contribute €15.4 million a year, with foreign-owned retail banks contributing €1.7 million, and IFSC entities some €1 million. In addition, the banks and credit unions were to pay another €100 million to supplement the fund.

However, this measure was overtaken by other events, notably at European level through the Bank Recovery and Resolution Directive. This requires member states to set up resolution funds that are to be pre-funded by contributions from institutions. “Consequently, banks will be required to pay contributions into the domestic BRRD fund in 2015,” the department’s correspondence states.

Next year the banks will come under the remit of the Single Resolution Mechanism and their BRRD contributions will be paid into the single resolution fund.

The net effect of all this is that credit unions will be the only institutions to pay into the Irish resolution fund. The Central Bank said yesterday about €19 million has been collected for the resolution fund to date, with credit unions contributing €14.1 million of this.

The current balance in the resolution fund is €236.85 million due to withdrawals relating to certain credit unions that ran into difficulties. Fund resources have been used in three cases concerning credit unions.

The most high-profile one involved Newbridge Credit Union where €24.1 million has been paid to date from a maximum amount of €53.9 million. Permanent TSB took over the credit union in 2013 following a High Court order.

The assets and liabilities of Howth Sutton Credit Union Ltd were transferred to Progressive Credit Union Ltd in March 2014, drawing €2.15 million from the fund.

Last month, the fund had an additional withdrawal following the resolution of Killorglin Credit Union at a cost of €2.15 million. In addition, the Central Bank has charged costs of €2.3 million to the fund.