Restrictions to be imposed on ‘troubled’ credit unions

SOME credit unions could face an uncertain future after the Government pledged to “restrict” the operations of those in most trouble as part of an overhaul of the sector.

In an updated agreement with the EU and IMF on the bailout deal following their recent visit, the Coalition also promises to prepare a draft programme for the sale of state assets by the end of the year.

The revised memorandum of understanding, which was only slightly amended, was published on the Department of Finance website last night.

It said restructuring of credit unions will begin straight away: “Immediate steps are being taken to deal with weaknesses in the most troubled institutions, including restrictions on their operations where appropriate,” it said.

The community-based saving and lending clubs, which are owned by members, are under review after some lent aggressively in the Celtic Tiger years and have been burnt by the property crash.

“We will take all measures necessary to restructure the sector and address difficulties in individual credit unions while minimising any fiscal cost,” the memorandum said.

The restructuring process will take account of the interim report of the Commission on Credit Unions — an 11-person commission, comprised largely of senior managers from within the sector — due in September.

Almost two thirds of the population — or 2.9 million people — are members of credit unions which hold savings of nearly €11.9billion.

The financial regulator said last year that some credit unions were under severe financial pressure and on average they were under-provisioned on their loans by about 40%.

The Government also promised to draw up a draft programme by December to identify state assets that could potentially be disposed of and lay out a timetable for doing so.

It has already agreed to raise €2bn from the sale of state assets.