Is this cap on shares common in credit unions? I must admit I do not know if a previous, higher cap - which did not include me - existed in the CU. Do members have to abide by this new ruling? Is there an alternative? Ideally I would like to let things stay as they are.
Or if you have a loan then consider reducing/clearing it with any money that you have in shares.I would suggest you pull out some funds and deposit them with An Post, EBS or some other term deposit that will probably earn you more than the CU.
Looks like the policy varies from CU to CU alright.
Should this limit have been notified to people when they opened their account? My own credit union hasn't ever mentioned it.
Sorry to go slightly off-topic but several of those google results say that your shares are protected under the Savings Protection Scheme up to a max of €12700 in all credit unions participating in the Scheme. This is the first I have heard of this, does this mean that any savings I have in excess of that limit are unprotected? Or if my credit union doesn't participate in the Scheme that none of my savings are protected. Confused now.
The CU tends to describe this as "free" insurance cover but ultimately you as a member pay for it somehow. TINSTAAFL!.I have no idea who pays for this either if not the credit union.
Should this limit have been notified to people when they opened their account? My own credit union hasn't ever mentioned it.
Sorry to go slightly off-topic but several of those google results say that your shares are protected under the Savings Protection Scheme up to a max of €12700 in all credit unions participating in the Scheme. This is the first I have heard of this, does this mean that any savings I have in excess of that limit are unprotected? Or if my credit union doesn't participate in the Scheme that none of my savings are protected. Confused now.
As a matter of course do they give new members a rules booklet? Whether or not most people actually read it is another matter...Each CU is autonomous within the terms of the Rules and Act. Each can set a maximum savings limit or none. They certainly should inform members on joining.
Most CU's do not offer a rulebook to new members. There is definitely a democratic deficit in our member owned credit unions with most members assuming that we are all branches of a central entity. I think it suits some CU activists that members are ignorant of the workings of their CU. A CU with 20,000 members might only get 200 at the AGM and a significant proportion of the 200 would be existing board members, staff, their families and friends!As a matter of course do they give new members a rules booklet? Whether or not most people actually read it is another matter...
Capping shares/deposits is for balance sheet management as is limiting lending amounts.
A credit union, just like a bank, must maintain capital buffers -reserves. The minimum level of reserves is regulated by the Central Bank and set at this time at 10% of total assets. Assets are made up of loans and investments backed by (funded by) shares & deposits (liabilities). If the level of funding increases then the credit union lends or invest these funds to generate a return which if higher than the cost of running the business is used to (a) maintain reserves at the 10% and (b) fund investments in infrastructure and (c) pay a dividend. Right now many credit unions are just about managing to fund (a) - some are not.
If savings increase then this leads to an increase in assets which means the credit union must generate enough profit to fund the increase in reserves. For example a credit union has €50m in assets and reserves of €5m (10%). If it takes in €5m in savings its assets will increase to €55m. It must now have €5.5m in reserves.
The problem for many is they are finding it difficult to maintain the 10% reserve ratio - and as they cannot generate the profits needed they are shrinking the balance sheet -hence deposit and lending limits.
You seem to ignore the fact that the reserve requirement is totally inappropriate and unrealistic for new funds coming into the credit union.
E.g. member lodges €50K new funds into the CU. Ceteris paribus this means the CU must provide €5K in new reserves, despite (a) its impossible to make €5K return on the €50K lodged in the year lodges and (b) the complete lack of risk weighting for what the CU does with the €50K - the CU might put the €50K in a capital guaranteed deposit a/c with no risk to the funds deposited - no need for €5K buffer.
Your thoughts on this specific example?
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