SIX Central Bank and Financial Services Authority proposals for a credit union guarantee fund have been rejected out of hand by the Irish League of Credit Unions which wants to retain full ownership and control of any new scheme.
In a document circulated to each of the 505 credit unions affiliated to the Irish League of Credit Unions (ILCU) all six options outlined by the Central Bank’s registry of credit unions were rejected by the ILCU.
And the ILCU want any future fund to be constituted so as to allow the accounts of the scheme to be consolidated within the accounts of the Irish League of Credit Unions.
“We believe that the only way in which to protect the ethos of the movement under any new arrangements (which may come about as a result of this process) is to ensure that the credit unions retain ownership and control of the new Credit Union Stabilisation Scheme.
“Anything else would go against the self-help, co-operative ethos of the credit union movement.”
A special meeting of the ILCU is to be held on September 18 next at which the ILCU response to the Central Bank’s proposals for a stability scheme for credit unions will be discussed.
However, when the Central Bank published its consultation paper for stabilisation support for credit unions in June it stated: “We doubt whether the current arrangements would be able to cope with a widespread problem or, indeed, a series of individual problems over a sustained period of time in the sector.”
The document identified how stabilisation arrangements might be modernised to better meet the needs of credit unions and their members. It also identifies important arguments for and against the availability of stabilisation arrangements, including those concerning moral hazard.
The paper also pointed out that the current ILCU’s savings protection scheme (SPS) of €119m works out at less than 1% of the total assets of the movement.
The Central Bank put forward six stabilisation models, that could be deployed in the future including the “status quo”.
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