THE CENTRAL Bank has begun official discussions with the board of the Irish League of Credit Unions about implementing a new regulatory framework for the sector, but has not yet completed stress tests required under the International Monetary Fund-European Union deal.
Under the IMF-EU package, Ireland was required to have completed a full assessment of the loan portfolio of credit unions and have in place a strategy for the sector by the end of April. It is understood that the tests are not yet finished but are close to completion. More than 400 credit unions are in operation in Ireland.
Under the bailout conditions, the new legislation – known as a statutory resolution regime – must be submitted to the Dáil by the end of December this year.
In a statement yesterday, president of the Irish League of Credit Unions Mark Bailey said discussions with the Central Bank had been “constructive and purposeful” with a “shared intent to ensure that the future of credit unions can be assured and supported”.
Some 1,500 representatives from Ireland’s credit unions are gathering in Belfast this weekend for the annual general meeting of the Irish League of Credit Unions. Among the proposals to be discussed is a motion to increase the value of the Savings Protection Scheme – a fund owned and operated by the association and designed to support credit unions facing financial difficulty.
It is not clear whether the scheme, in operation since 1989, will form part of the new special resolution legislation being drafted. In a statement yesterday Minister for Finance Michael Noonan “praised the work of the league in managing the Savings Protection Scheme over more than two decades”.
The league has bailed out 12 credit unions. However, there has been speculation that stress tests could see the sector exposed to 25 per cent of the existing €7 billion loan book – a figure that could exceed €1.5 billion. However, this figure has been sharply dismissed by the credit union sector.
A number of credit unions also invested up to €300 million in Irish bank bonds, including the subordinated debt of Anglo Irish Bank, which led to losses of up to 75 per cent on their investment.
