Credit union body branded ‘negligent’

THE country’s main representative body for credit unions has been branded “irresponsible and negligent” for appearing to question the security of the state bank guarantee, under which the credit union movement is indirectly protected.

Media reports earlier last week suggested that the Irish League of Credit Unions (ILCU) is becoming more concerned over the safety of its surplus cash, reportedly, around €3 billion, in Irish banks.

While credit union members’ money is protected under the deposit guarantee scheme, the ILCU — although not directly covered under the blanket bank guarantee (the eligible liabilities guarantee scheme) — has its deposits covered by the ELG.

The report also quoted ILCU management, who seemed to suggest concerns over the blanket bank guarantee and, thus, the safety of deposits with the Irish institutions.

“It is irresponsible and negligent for the ILCU to question the value of the Government guarantee.

“They were wrong to say it and are wrong to have that concern; especially given the amount set aside in the EU/IMF bailout to prop up the country’s banking and financial system, of which they form a secondary element.

“Statements like this, in times like this, only have the ability to stoke up unnecessary fear that could, potentially, lead to a run on the credit unions,” according to one industry figure.

However, an ILCU spokesperson said that the body is “satisfied that Irish banks are secure”.

The media reports also suggested that the Central Bank is set to issue fresh investment guidelines to credit unions to allay its concerns, which isn’t actually the case.

Existing guidance, dating from 2006, suggests that credit unions can hold no more than 25% of their surplus funds with one institution and that deposits should only be with A-rated banks, a rule which has now been changed to any guaranteed bank.

A spokesperson for the Central Bank said yesterday: “The position on ratings is that the 2006 Guidance Note on Investments still applies.

“We issued a circular to credit unions in 2009 which set out the position regarding placing deposits in credit institutions where the amount is statutorily guaranteed, or had protection in the form of interventions by EU Governments.

“In such cases we look to the sovereign as distinct from the rating of the credit institution itself.”