The Central Bank has begun a public consultation on proposals to stabilise the credit union sector and modernise the regulatory regime governing the institutions.
Irish credit unions have about €14.5 billion in assets - €7.3 billion in investments and €6.8 billion in loans to members.
"The credit union movement has grown rapidly over the last 10 years. Over the last couple of years financial pressure on credit unions has resulted in them experiencing significant stresses on their two main assets – investments and loans," the Central Bank said. "This has had consequent impacts on other financial aspects of their business, in particular liquidity, solvency/reserves and dividends."
There are 414 credit unions registered in the State with around 2.9 million members, which have €12.6 billion in savings and total realised reserves amount to €1.7 billion.
Credit unions are currently covered by a savings protection scheme (SPS), which is owned and operated by the Irish League of Credit Unions, and since September 20th 2008 has been included in the statutory deposit guarantee scheme (DGS) under which 100 per cent of each member's savings is covered up to a maximum of €100,000.
The current SPS fund totals about €119 million, less 1 per cent of the total assets of the credit union sector at end December 2009.
"The current SPS does provide some degree of stability support," the report said. However, the SPS is not itself regulated, nor under any degree of regulatory control, and therefore the Central Bank of Ireland is unable to place any formal reliance on it as a support mechanism."
The paper proposes six stabilisation models, including maintaining the status quo, coming under Central Bank control, or voluntary stabilisation.
"Given the challenging economic conditions in which credit unions, like all financial institutions, are now operating, it is important that there is complete clarity about the purpose, scope and availability of stabilisation arrangements," the Central Bank said.
Submissions are being accepted before August 16th.
