Twenty out of 392 credit unions have less than legal minimum of 10 per cent of assets

Twenty credit unions out of almost 400 have below the legally required minimum level of assets to cover their loans but the Government has provided €500 million in funding, the Dáil has heard.

Tánaiste Eamon Gilmore said that, out of a total of 392 in the State, "some 20 credit unions have reported regulatory reserves below the minimum requirement of 10 per cent of assets".

This had resulted an increased capital shortfall of about €11 million, but Mr Gilmore said it had to be put in the context of the €500 million in Government funds.

The average credit union loan is €7,764, Mr Gilmore said. But in the controversy surrounding Newbridge credit union, there were 26 loans there averaging €550,000 and one of €3.2 million, in excess of legal restrictions of a maximum of 1.5 per cent of total assets.

Case

-by-case basis
Referring to media reports that one in four credit unions w

as in trouble, the Tánaiste said the Central Bank was "working through a portfolio of about 100 credit unions on a case-by-case basis", and "this may be where the reportage has taken off".

About 53 per cent of loans exceeded the five-year maximum set out in legislation.

He said the Central Bank was dealing with issues such as levels of arrears, inadequate bad debt provision, high fixed-asset to total-asset ratios and other supervisory concerns.

But, he said, “the actual number of credit unions that have reported regulatory reserves below the minimum requirement is 20 of 392”.

He was responding Fianna Fáil's Seán Ó Fearghaíl, who described the circumstances of the takeover of Newbridge credit union by Permanent TSB as unfortunate. "There was something particularly unedifying in seeing the Central Bank go to the High Court on Sunday evening, which I believe was prompted by reports on the local radio station, Kofi, that this was going to happen this week."

The Kildare South TD said the process of dealing with the controversial Newbridge credit union had taken two years and cost at least €3 million.

'Spectacularly unsuccessful'
He asked if the Tánaiste agreed the efforts of the Central Bank and the regulator had been "spectacularly unsuccessful".

Mr Gilmore said action taken in relation to Newbridge credit union was taken to protect members and savings of the credit union and to prevent a situation arising whereby the credit union would have to be liquidated. There would have been a loss of €1.1 million in unprotected savings.

He said the Minister for Finance had agreed to a financial incentive of €53.9 million, including €23 million in cash up front to fill the hole in the balance sheet, €4.35 million in restructuring and integration costs, and €2 million for other liabilities and risk shares on the transferring loans, which if written off immediately would cost an additional €24.7 million.

“Other options had been looked at over a period of time, including the possibility of an amalgamation of that credit union with another credit union, but that did not work out.”

He said the Government supported the future return of a credit union to Newbridge and “we will work with people in Newbridge to that end”.