Q&A: What’s going on at Newbridge Credit Union?

What has happened to Newbridge Credit Union?

Last night the High Court, as a "matter of urgency", agreed to the transfer of all its loans and savings to Permanent TSB. According to the Central Bank, the credit union's lending practices differed from what was typical of the sector with loan sizes that were many times the average.

The credit union has approximately 32,000 deposit accounts and 7,000 loan accounts. In 2011, total loans stood at almost €140 million. Large loans given to developers were considered to be a major cause of problems while concern was also expressed about “persistent breaches of regulatory standards” at the Kildare credit union.

Why the urgency?

The credit union has been in trouble since 2008 and the court heard that it was at risk of going into immediate liquidation if the transfer was not approved before it opened its doors this morning. “A problem in credit unions could cause confidence issues and contagion across the sector,” the Central Bank told the court, adding that it could give “rise to instability in respect of the general banking sector.”

What will the move cost?

The bailout will cost taxpayers some €54million.

What’s the problem?

The Central Bank has been seeking to address financial and governance issues at Newbridge Credit Union since 2008. Early last year it secured a High Court Order for the appointment of a special manager after which it approached credit unions, including Naas Credit Union to discuss merger possibilities.

What happened then?

In April, Naas Credit Union submitted a proposal to the Central Bank which set out the basis upon which it would be prepared to consider a merger. That credit union then carried out a detailed investigation and assessment of both the situation of Newbridge Credit Union and its own position before deciding that it could not go ahead with the deal because of the size of the Newbridge loan book. The Central Bank then looked at the other financial institutions in the town and decided that the transfer to PTSB was "ultimately the only viable solution available" with the alternative being a "full-scale immediate liquidation of the credit union with interruptions to members' access to their funds and risks to depositors not covered by the Deposit Guarantee Scheme".

Could Newbridge not trade its way out of the problem ?

The Central Bank did not think so and has said that the position of the credit union was so fragile that it would not be possible to reach an acceptably sound financial situation within a reasonable timeframe if it continued trading on its own.

So what happens to the credit union movement in Newbridge?

The Central Bank says it recognises that there is a demand for the services of a credit union and is examining what arrangements can be put in place to provide specific credit union services for the community in the future, including the possible extension of the common bond of credit unions in the local area.

Will the Newbridge Credit Union building remain open?

All services, including deposit and lending facilities continue to be available from the credit union premises. Services will continue to be available from the current premises. The move will involve no redundancies to the credit union’s 36 staff, who will now transfer to Permanent TSB, and the bank, which already has a branch in Newbridge, will keep the office open over the coming months and will announce more details in due course.

What has happened to the loans and savings that were with the Credit Union?

Following an application by the Central Bank of Ireland, the High Court approved the transfer of Newbridge credit union to Permanent TSB, at which point the bank had assumed ownership and management of the assets and liabilities of the credit union with the exception of the premises. All services, including savings and lending facilities continue to be available from the credit union office.

Is the money people have on deposit safe?

Eligible deposits continue to be covered by the Deposit Guarantee Scheme up to €100,000 per person. The legal agreements that underpin existing loan and other arrangements are not altered by the transfer; Permanent TSB simply assumes the same rights and responsibilities formerly belonging to Newbridge Credit Union.

What about loans?

Loan applications will continue to be accepted and assessed in accordance with Newbridge Credit Union’s existing lending policy. Loan applications that were submitted recently and which are currently awaiting a decision will, be processed as normal.