Central Bank fears for 100 credit unions

Around 100 credit unions are on a Central Bank watch list because of concerns over the level of their reserves and bad debts.

But the Central Bank and Government have been at pains to stress that none of them have problems of the scale that caused the takeover of Newbridge Credit Union.

Newbridge Credit Union was taken over by state-owned Permanent TSB bank in an unprecedented move following a late-night application to the High Court on Sunday night as it came within days of running out of cash.

Previously, the country’s largest credit union with 36,000 members had been under a government-appointed special manager for almost two years after it emerged it had lent far in excess of the norm and its bad debts were growing out of control.

Taoiseach Enda Kenny said the problems at Newbridge “don’t apply anywhere else as far as we are aware”.

Junior finance minister Brian Hayes said: “It’s not the position that others are in this kind of position.”

However, as the scale of the problems at Newbridge became clear yesterday, it was also confirmed that weaknesses have been identified in about 100 others — one quarter of all credit unions in the country.

They are being monitored and advised on how to improve their loan books and boost their reserves and some are being urged to consider merging with stronger neighbouring credit unions.

A total of 14 mergers have taken place voluntarily in the last few years, but more are expected.

Across the sector, just over 20% of loans are in arrears, but at least 50 credit unions have more than 30% of their loans in arrears.

At the same time new loans are declining and with them the ability of credit unions to make money from interest payments.

Fiona Muldoon, director of Credit Institution Supervision at the Central Bank, said the sector was being watched closely so that problem credit unions could be quickly identified.

“I don’t think at this point we could say that Newbridge is the only one,” she said, but she added: “Nor do I think we could say that it is endemic and widespread throughout the sector.”

News of the Permanent TSB takeover — which will require a €53m injection of state funds — was greeted with anger by the Newbridge Credit Union Action Group, which said it would mount a legal challenge to the move.

Spokesman Willie Crowley said: “When the special manager was appointed, the credit union was solvent. Yes, there were issues. If those issues had been addressed, we wouldn’t be in this position now.”