Lifeline for struggling credit unions

FINANCE Minister Brian Lenihan has indicated his intention to give struggling credit unions a financial lifeline as well as extend their lending limits.

He told credit unions at the weekend that in order to safeguard their position and the public’s confidence in their stability, he was looking at providing them with liquidity support.

Any move to offer hard-pressed credit unions access to a central emergency fund could also lessen pressure on members experiencing difficulty repaying loans.

Mr Lenihan told the annual general meeting of the Irish League of Credit Unions (ILCU) that he understood the liquidity position of the movement was “healthy” overall. But he said that it was important to look, on a contingency basis, at mechanisms that would be available to provide the special fund should the need arise.

He added: “My department has been in discussions with the league and other stakeholders, both within the credit union movement and the Regulator and Central Bank about this issue with a view to finding the best way forward.”

It is expected that any liquidity support reserve for weak credit unions may be partly funded by stronger ones.

Credit Unions already benefit from access to a €100 million stabilisation fund controlled by the ILCU. But a new liquidity support scheme would use surplus funds from the movement as a whole.

One of the most pressing issues facing credit unions was the problem of members trying to repay loans, the minister said adding that “it should be possible to explore all reasonable steps to allow a member, in carefully monitored and controlled circumstances, to re-schedule their repayments to a level which is affordable to them”.

To help credit unions facilitate revised repayments, Mr Lenihan announced a review of their long-term lending limits.

His department has reconvened a group which reviewed section 35 of the Credit Union Act lending limits in 2006. The rules govern the maximum length of time for which a credit union’s loan portfolio can be outstanding.

Draft legislation has also been drawn up on extending the deposit guarantee scheme for credit union savers, which was announced by the minister last September. Credit unions have until the second half of next month to consider the legislation.

ILCU president Uel Adair told the meeting in Killarney that the group’s 508 member credit unions had 2.9 million members between them, €14 billion in assets and €11.9bn in savings.