CUs get new date for regulatory ratio

CREDIT Unions which cannot reach the new Regulatory Reserve Ratio (RRR) target of 10% by the previously announced September 30 deadline, will have an extra five years to do so.

The Financial Regulator and the Registrar of Credit Unions announced, back in April, that Irish credit unions would be required to maintain an RRR of not less than 10%. The RRR represents the amount of funds held in reserve by unions, as a percentage of their total assets. The increased percentage is to protect against the risk of losses and ensure that unions can keep adequate cash reserves and, ultimately, stay afloat and keep customer confidence.

Earlier this year, when outlining Credit Union performance for 2008, Irish League of Credit Unions (ILCU) chief, Kieron Brennan warned that this year (up to the end of September) would be the movement’s first tough year “in living memory.” It is understood that approximately one quarter of the country’s 400 or so credit unions are currently operating at a loss.

The Registrar of Credit Unions has now set a new timetable for unions. By the end of next month, they must have an RRR of 7.5%, at least. There will be an annual 0.5% increase in the minimum requirement up until September 30, 2013 when the cut-off point will by 10%.

The ILCU has welcomed the revised timetable – the body’s president, Mark Bailey, saying: “The new timetable gives credit unions the increased flexibility to comply with the regulator’s requirements. We’re satisfied that the outcome of these negotiations is the best result for our members.”

In addition, any credit union which doesn’t meet the RRR of 10%, but still manages to generate a surplus, may – with the approval of the registrar – still pay a dividend.

Last week, the Irish Examiner reported that the two Galway-based credit unions – Oughterard Credit Union and St Anthony’s & Claddagh – are set to merge, creating one union with 36,000 members and assets of over €160m.