Europe gives go ahead to €250m credit union scheme

A SCHEME to resolve credit unions involving €250 million of state funds has been approved by the European Commission.

The interim report of the commission on credit unions noted that 56 of the 400-plus credit unions were under capitalised, with 27 seriously so.

The state committed to inject €250m by the end of the year under the bailout programme and, if needed, a second capital injection will be made in 2012.

The money will be recoupable over time through a levy on credit institutions that had suffered as a result of the country’s banking fiasco.

The commission’s approval was welcomed by Finance Minister Michael Noonan, who said it

The credit union resolution scheme, under the Central Bank and Credit Institutions (Resolution) Act 2011, which came into force on October 28, gives the Central Bank the power to deal swiftly with credit institutions, including credit unions, when necessary.

The options include the appointment of a special manager, modified liquidation, and the transfer of a credit union’s assets and liabilities to a willing transferee.

In the case of a transfer, the minister can provide an incentive to whoever is taking it over, and as this may distort competition, it was necessary to get approval from the commission, a statement from the Department of Finance said.

The Government set up an independent commission in May to review the future of credit unions and make recommendations on regulation.

Their mandate was to take into account their not-for-profit status, volunteer ethos and community focus, while ensuring full protection for deposits and the credit unions’ financial stability.

The interim report which dealt with the strengthening of the regulatory framework, will now be followed by the final report in March. A new regulatory framework will be published in June.