Help credit unions: McGrath

Fianna Fáil finance spokesman Michael McGrath has called on Finance Minister Michael Noonan to use the powers granted to him under the IBRC Act to make good on the €15m of losses suffered through the liquidation of IBRC.

Sixteen credit unions, which invested between €500,000 and €1.5m each, in an Anglo Irish Bank bond in 2005, suffered roughly €15m in losses when the bank was liquidated in February.

The bond was a deposit-based investment instrum-ent, which was scheduled to mature this year. Mr McGrath said it should have been covered by the Government’s eligible liabilities guarantee scheme.

Instead, only the first €100,000 of each investment is being covered.

Under Section 9 of the IBRC Act, Mr Noonan, has full discretion to instruct the special liquidator to act outside the laws of a normal liquidation process. As it stands, the credit union losses will be lumped in with other unsecured creditors.

The head of the Irish League of Credit Unions, Kieron Brennan, argues that the bonds should have been transferred to AIB in 2011, along with the rest of IBRC’s deposits.

A spokesperson for the Department of Finance said Central Bank and NTMA will determine what deposits, bonds, or investment products are covered by their respective guarantees.

“However, as has been outlined by Government some senior bondholders and holders of investment products that are not covered by the eligible liabilities guarantee may incur losses on their investment,” the spokesperson said.

It is believed that the Government is reluctant to show any preferential treatment for unsecured creditors on the basis that it could create a precedent and pave the way for legal action from other IBRC unsecured creditors.

No credit union savings will be affected by the move. However, the sector is expected to absorb the losses through lower dividends to members.