Irish credit unions have accused the Government of behaving worse than the Cyprus authorities in imposing losses on the savings of ordinary people.

A total of 16 credit unions have suffered losses of approximately €15 million following the Government's decision to liquidate the former Anglo Irish Bank, subsequently called the Irish Bank Resolution Corporation (IBRC).

Chief executive of the Irish League of Credit Unions Kieron Brennan told the Irish Times yesterday that most of the losses would have to be absorbed by the credit unions involved. He said that would mean dividends might not be paid for a number of years in some cases, although shareholder funds would not be touched.

“This decision to allow the burning of a deposit-based instrument in Ireland is a first in the euro zone. In Cyprus they are debating something that might happen but it has already happened here,” said Mr Brennan.

He said his members were particularly aggrieved that a product designed specifically for credit unions had been treated in this fashion.

Mr Brennan has sent a letter to all 12 Irish MEPs in the European Parliament drawing their attention to “significant levels of credit union deposits which have now been reneged on by Ireland”.

Sanctity of deposits
He told the MEPs that each of the 16 credit unions had received €100,000 from the State's Deposit Guarantee Scheme but some credit unions invested €2 million and so were now carrying a loss of €1.9 million. Mr Brennan said current reports that the proposed bailout of Cyprus would constitute the first interference in the sanctity of deposits within the euro zone were incorrect as the Government had caused a loss of €15 million to the credit union movement in Ireland. "This is a deposit-based instrument and it has been burned. In doing this the Irish authorities are doing precisely what they said they would not do," Mr Brennan said yesterday.

He added that the Government had been responsible for the management of Anglo/IBRC and had prepared its plans for liquidation months in advance. He also said Anglo/IBRC had refused repeated requests from credit unions to transfer their deposit-based tracker bonds to AIB in 2011 at a time when a range of deposits had been transferred across. "The Government was responsible for Anglo/IBRC and so must accept responsibility for the consequences of the decision to liquidate the bank.

“We now want the Government to deal with the situation and force the liquidator to address it so that ordinary savers are not penalised,” said Mr Brennan.

Place in queue
However, Minister for Finance Michael Noonan told the Dáil yesterday that the credit unions would have to take their place in the queue with other creditors following the liquidation of IBRC. He said the tracker bonds sold to credit unions had a structured deposit element which was covered by the Deposit Guarantee Scheme and as a result the first €100,000 of any claim was covered. Mr Noonan added that the bond itself was not covered by the bank guarantee as it predated that scheme.

He told Fianna Fáil finance spokesman Michael McGrath that the credit unions involved had the option of getting out when the State moved virtually all deposits out of Anglo Irish Bank but they had decided to stay in. "If the hit on an individual credit union is such that it comes below the required reserves, it should take up the matter with the Credit Union Restructuring Board, ReBo".