Regulator tells credit union not to pay out dividend

Monaghan Credit Union, which has approximately 16,000 members, has been instructed not to issue a dividend for its 2005 year because of bad debts.

The instruction from the Registrar of Credit Unions, Brendan Logue, was published in Iris Oifigiúil yesterday. The credit union, which has assets of approximately €98.5 million, is due to hold its agm next Wednesday.

The accounts for 2005 indicate it proposed to issue dividends totalling €731,217. The board told The Irish Times it hopes to be able to resolve outstanding issues with the regulator and pay the dividend.

Notes to the credit union's accounts show an examination of its books in September 2005 was authorised by the registrar.

The board said that during 2005, the credit union conducted a detailed review of outstanding loans and had to recognise €7.15 million in bad debt.

It said that in 2005, income had increased by 4.25 per cent, to €6.5 million, creating a surplus of €920,000. It said that on solvency the position of the credit union was better than the average for members of the Irish League of Credit Unions (ILCU).

The regulator's spokesman said the value of the bad debt write-off, and the required provision for bad debts, totalled €11.9 million. After funds from its reserves had been used, the credit union recorded a loss for 2005 of €3.8 million, he said.

The credit union board said the review conducted in 2005 followed a major change in policy. "Traditional credit union lending policies allowed for the granting of 'soft loans' and facilitated the roll-over of underperforming loans, the terms of which were more beneficial to the member than to the credit union as a whole."

The board said it decided these policies were no longer appropriate and "large numbers of underperforming loans became evident when the credit union ceased the issue of roll-over loans".

The board said it is still actively pursuing recovery of the loans. Last year and so far this year a total of €672,000 had been recovered. Judgments have been obtained and "committal orders granted in 17 cases, with a total of 107 instalment orders obtained. We have also initiated 'for sale' proceedings against three properties".

The regulator's spokesman said the credit union's balance sheet "indicates that Monaghan Credit Union is solvent and that there are no liquidity issues. However in order to protect members' savings, the Registrar has issued a direction to the credit union to prevent the payment of a dividend this year.

"This is being done in the interests of its members and to prevent further depletion of the reserves of Monaghan Credit Union."

The write-off in the credit union's accounts is understated to the extent of a proposed guarantee of €4.7 million from the ILCU, he said.