Credit union scheme extended

The resolution for Ireland’s credit unions will be extended until the end of the year, the European Commission has agreed.

The scheme, for which permission is required under state aid rules, was first approved in December 2011 and has been extended regularly since.

The credit unions, following the bank failures, were unable to meet regulatory requirements set by the Irish Central Bank and the scheme was introduced to ensure financial stability and minimise economic loss.

It allows for the orderly resolution of failing credit unions by transferring their assets and liabilities to a purchaser. The state financed a €500m resolution fund to allow the Central Bank deal with the sector.

In 2011 when the scheme was first approved, there were 408 credit unions with savings of €12.2bn.

In a statement announcing the prolongation of the scheme for another six months, the competition director said the scheme was in line with its guidance on state aid to banks during crises. The measures were well targeted, proportional and limited in time and scope — so meeting state aid requirements.

Earlier this month the Central Bank in a lengthy paper following consultation with the credit unions set out a series of steps it would take immediately, including developing regulations.

These will cover lending, savings, investments, borrowings, liquidity and reserves and take account of the existing regulatory framework.

Last year the World Council of Credit Unions reported that Irish credit unions had the second highest penetration rate in the world with 73% of the population members.