Credit unions to get €1bn bailout

THE state will pump up to €1 billion into the credit union sector to plug a financial black hole and save a number of credit unions from collapse.

Finance Minister Michael Noonan said that while some credit unions had no problems, “others are on the brink of falling down a hole”.

A number of emergency steps will be taken in the coming weeks to stave off their collapse, with the overall problem ultimately expected to cost between €500 million and €1bn to fix.

“If the movement was one large bank with individual branches, it would have no problems because the good ones would balance the bad ones, but individual credit unions have problems that are coming down the road quickly,” Mr Noonan told the Seanad yesterday.

“Some of them will need to be dealt with immediately, but we will not do it in one big bang. My advice is that this will cost between €500m and €1bn.”

A commission was set up earlier this year to examine the sector and its interim report is due to go to Cabinet next Tuesday, with new credit union legislation to be drawn up before Christmas.

But Mr Noonan said that matters had been “overtaken by events” and the Central Bank had requested that it urgently be given extra powers to deal with credit unions “that are on the brink”.

Those powers are likely to be granted by way of amendments to a piece of banking legislation due before the Dáil next week.

Mr Noonan said the plugging of the hole in the credit union sector represented the final bit of restructuring that needed to be done in the financial retail industry.

He said that while a €24bn recapitalisation of the banks had taken place earlier this year, the state’s contribution had been only €16.4bn, “considerably lower than initially envisaged”.

As a result, the Government had “a bit in hand” to sort out the credit unions, even though it was a “big hunk of money”.

Mr Noonan said the industry regulator had issued directions to over half the credit unions instructing them to limit the amount they could advance to particular customers.

“Some of the seriously impaired credit unions have been limited to €1,000, but that is low,” he added, saying his officials would speak with the regulator.

He was responding to questions on the matter from Fine Gael senator Tom Sheahan, who expressed concern about the effect of the crisis on credit union customers.

Meanwhile, Mr Noonan also revealed that a senior international banker has spent the past 10 days examining NAMA at his request.

Concerns have been raised about NAMA and the manner in which it is dealing with toxic loans and the developers linked to them.

Mr Noonan said he would receive the banker’s advice today.

“I will get a better readout of it. I do not propose to change the legislation (governing NAMA) yet. In the last three months NAMA has moved more efficiently than was previously the case,” he said.

“The people who work for it are above reproach; they are good public servants who are working very hard. It is a colossal task.”

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