A controversial new rule limiting deposits in credit unions to €100,000 has been brought into force by Minister for Finance Michael Noonan.

However, in a concession to credit unions, the rules are to be reviewed by a committee that advises the Government on credit union policy. It will report in six months.

Credit unions and their members will be given time to adjust to the new regime and some exceptions are to be allowed.

It had already been announced that credit unions would be able to apply for permission to hold on to existing deposits over the limit. Now it will also be permitted for bigger credit unions to apply to be allowed to attract new deposits over €100,000.

The Minister signed the commencement order on the new rules just before Christmas and they are due to come into force on January 1st. The major credit union representative bodies are expected to consider what attitude to take in the light of new concessions in meeting to be held early in the new year.

Sources say the credit union movement will continue to oppose the new plans and is likely to seek to make regulation of the sector an issue in the general election campaign.

Diversified funding

The rules – originally included in a 2012 Act, the provisions of which have gradually been brought into force in recent years – are intended to ensure that the funding of a credit union is sufficiently diversified and is not reliant on a small number of members.

Following intense lobbying by the credit unions, it was first announced that credit unions would be able to apply to hold on to existing deposits over €100,000. The Central Bank had also indicated it would review the rules within three years.

However, following discussions, it has been agreed that the new rules will be reviewed over the next six months by the Credit Union Advisory Committee, a statutory committee established last year to advise the Minister for Finance on credit union matters.

Also, in addition to credit unions being able to apply to hold existing large deposits, applications will also be considered from bigger credit unions seeking to attract new deposits over the limit. Credit unions have already been briefed on the application process to hold on to existing deposits and, according to a recent answer to a parliamentary question by Mr Noonan, will be asked to apply within the first quarter of 2016 if they wish to do so, with the Registrar of Credit Unions due to reply by the end of the second quarter.

As such credit unions and savers will be given time to adjust to the new rules.

Despite these concessions, sources say the credit union movement will fight the new plan and will seek to make regulation an issue in the general election.

In its recent annual financial report, Ed Farrell, the chief executive of the Irish League of Credit Unions said: “Credit unions want to evolve and change but are increasingly frustrated at the regulatory roadblocks put in our path. These roadblocks threaten the ability of credit unions to continue to serve in communities throughout the country in the future.”

Hindering growth

Registrar of Credit Unions Anne Marie McKiernan has said policy is not hindering the growth of the movement.

She told a recent Oireachtas committee hearing, “We have not seen enough from credit unions by way of well-structured, viable and sustainable plans for development which also deal with the current operational and financial challenges that have to be dealt with to move forward successfully.”

The registrar has been trying to push a restructuring agenda.