Credit unions raise SPS concerns

CREDIT unions in the North will be at a disadvantage if the Financial Regulator imposes a guaranteed savings protection scheme (SPS), the credit union movement has warned.

In its annual report for 2005, released last week, the Irish League of Credit Unions (ILCU) said the Registrar of Credit Unions, which is part of the Financial Regulator’s office, has drawn up a statutory SPS to replace the existing scheme and has presented the plans to Finance Minister Brian Cowen.

Under the plans the current SPS, which helps individual credit unions that run financial trouble, will become a statutory scheme.

The ILCU says it is working on its own revised savings protection scheme.

“In seeking recognition of the Savings Protections Scheme, the ICLU is mindful that the scheme protects credit unions in both the Republic of Ireland and Northern Ireland. Any statutory Scheme developed for Republic of Ireland credit unions would only have the effect of marginalising Northern Ireland ILCU affiliates,” the annual report says.

The report also says that a Supreme Court challenge against an earlier High Court ruling on whether the SPS breached competition law will be delivered in a few months time.

The Competition Authority mounted a challenge to the ILCU after it emerged that credit unions which that left the league would no longer be protected by the SPS. The Higher Court ordered that the ILCU to provide access to the Savings Protection Scheme to all credit unions in the Republic of Ireland.

In 2002, around 20 of the country’s largest credit unions, which represented almost a quarter of the total asset base, left the ILCU to form the Credit Union Development Association.

The CUDA members left following a number of disagreements on future of the credit union movement. The growth of credit union lending has lagged that of the overall lending market in recent years and the ILCU was also rocked by the failed installation of a new IT system

The ILCU has hired Canadian firm Eckler Partners to review the SPS fund. The fund is currently valued at €92 million, or 0.73% of the credit unions’ total asset base of €12.6 billion.

The ILCU said Eckler will “undertake an assessment of the adequacy of the fund in the context of current and future potential calls on it”.