CREDIT UNION loans in arrears increased to 14.9 per cent of all loans by the end of June, the Irish League of Credit Unions disclosed yesterday.

The ratio increased from 9.4 per cent at same time last year. League chief executive Kieron Brennan said savings were pledged against 30 per cent of loan arrears.

Write-offs in the year to June were €66 million, or 1.03 per cent of all loans, compared with €51 million in the year to June last year.

The movement is increasing its provision against bad loans and by the end of June these were 8.4 per cent of all loans, or €512 million. The end of the financial year for the league’s member unions is September 31st and by that date the provision for bad loans may have risen to €630 million, or 10 per cent of the €6.3 billion loan book.

The league’s credit unions are building up their reserves and the president of the league, Mark Bailey, said member unions should prioritise this over dividends.

The league has 503 member credit unions in the 32 counties, which in turn have 2.98 million members. There was an increase in membership of 40,000 in the year to June.

The league’s credit unions had €14.1 billion in assets and €12.2 billion in savings at the end of June, roughly equivalent to a year earlier.

Members are dipping into their savings (shares) and are seeking more but smaller loans. The average loan during the year to June was €9,000. Mr Brennan said the league’s credit unions were relatively “under lent”.

Credit unions “are open for business and we have more than €3 billion available for 2010 to 2011 for our membership to borrow.”

Two credit unions, Roscrea and Charleville, had to receive guarantees from the league’s Savings Protection Fund during 2009. The Registrar of Credit Unions has suggested that it take control of the €125 million fund, but the league believes it has operated well since it was established in 1989. The league is willing to open the fund to credit unions that are not members, Mr Brennan said.

Tom Kiely, head of monitoring with the league, said 99 per cent of league members will have complied with the new stipulation that they have reserves equal to 8 per cent of assets by September. Most have in excess of the minimum, he said. “Five or six” credit unions will not make the figure, but are “very close”.

He said a small number of credit unions had up to 22 per cent of their loan book in arrears. “Even in the worst-case scenario their resources are sufficient,” he said. Members of credit unions are protected by the State’s savings guarantee scheme.

During the year to the end of June, league credit unions issued loans totalling €2.5 billion.

Mr Brennan contrasted the relative good health of the credit union movement with that of other financial institutions.