One in 5 credit unions 'in danger of closing'

El Camino

According to an article on RTE one in 5 CU's could close due to mounting loan losses. http://www.rte.ie/news/2011/0615/creditunions.html

So how secure are my savings in my local credit union? Do i need to be worried and should i withdraw immediately for fear of losing out?

Kennie1

Interesting article but not a bit surprising!

Last year I was in court for the day and the amount of judgement orders sought by my local credit union was very worrying to say the least! Credit Unions like the banks went crazy lending, their old credit policy of lending 3 times the value of your shares/loans went out the window and some even lent on a commercial basis which was reported back in 2008. Personally I borrowed 25000 as a deposit for a house despite only having 2500 in shares, glad to get it at the time though!

Regardless of all this the CU's deposits are state guaranteed like the banks (for all that's worth!)

Clifford6875

I think the best thing to do is to contact your own local credit union and assess the situation from there. Some are awash with money, others are on the verge of collapse.

According to my local credit union, who were very honest, they are one of the top ten in Ireland. They are a completely separate entity and are in no danger of being affected by the the less well positioned ones. They explained that the Financial Regulator wants the 80 or so CU'S in difficulty to merge with larger better performing ones which would mean the ones that are left are larger and in a better position to cope.

The CU movement in IRL has 14bn in assets and only 7bn in loans, its a pretty good ratio, certainly a lot better than Irish banks. They just need some proper management.

They have serious potential for growth, after all in September 2008 when our banks were on the verge of collapsing a very large amount of money that left the banks went into the credit unions. Like the bank's however, some were subject to very bad management.

Overall, worst case scenario, they will need state help at some stage down the line, they wont disappear overnight,nor will your savings in them, but there will be a lot less of them in five years due to mergers etc.

The credit unions have the same level of protection as the banks in relation to the government guarantee, the question is, is the guarantee worth the paper its written on, thats up to everyone to answer for themselves.

moorefield

Your savings in your credit union are covered under the government's deposit guarantee scheme which covers up to €100,000 per credit institution. This means for example if you had 100k with a credit union, 100k with a bank and 100k with another bank you are covered in each case. Theoretically if all three went bust you're covered up to €300k.

Credit unions are not covered under the ELG scheme which guarantees all covered bank deposits over the deposit guarantee €100,000 threshold. But few people will have over €100k on deposit with their credit union.

The sector is in trouble as 80 credit unions are close to or are insolvent - these will probably be either merged with others or temporarily taken over by the state via the central bank (the bank stabilisation law allows for the appointment of special managers)

But the problem doesn't end there as there are another larger group also in difficulty. See this blog for more on this aspect

All told it looks as if 309 credit unions will lose their independence and be merged into others or closed down over time. The cost of state aid has been estimated at €500m by one commentator and €1.5bn by another.

broker2008

http://www.icb.ie/membership.php - this is the membership and those pending for ICB.

This could cause a problem for anyone in arrears for a credit union loan and not their main mortgage, especially for those who borrowed the deposit from the CU. 100% loan and negative equity.

shockwave

Is there any way to find out if my local credit union is in trouble? and if it is should I be thinking of moving my money?

cookie1977

they're covered by the banking guarantee so there's no reason to panic

moorefield

@ cookie a savers money in a credit union is covered up to €100k under the deposit guarantee scheme. Credit unions are not covered under the bank guarantee scheme.