As regards concentration risk its size and its common bond dictates that in essence it has concentration similar to a branch of a Bank
CU A is right on the ratio of 10%. A new member wants to borrow three time his savings that he is bringing with him and has a tremendous savings habit. The CU receives €100k in savings (Debit Bank Asset Credit Shares Liability) The CU then lends €300,000 (Credit Bank Debit Loan so no change in overall assets as there is a swop from Bank to Loans).
H/ever the CU needs to put €10,000 aside NOW. Where and how will it get it? (assume only reserves are the Regulatory Reserve Ratio and its now reading less than 10%.
All the examples have to be viewed on the marginal case: If Credit Union A has total assets of €100m (all in Government Bonds) then it still has to have a 10% reserve ratio. Let us assume it has exactly that and it is break even. So it has reserves of 10%. Then it gets a Deposit of €1m and immediately invests in Government Bonds then its ratio should be €10,100,000. But it breaks even on operations all ready so it cannot come up with a €100k from anywhere.
It can switch some to lending so even if it accepted the deposit and lent out €1,000,000 @6% its earning would be €60,000 still €40,000 short.
Some regard defaulters as hero's and its a long process, years to get back €1500 easier to keep the savings and w/o the balance.Maybe there's a greater moral imperative to chase defaulters since they're effectively impacting their immediate neighbours in their communities by not paying?
If its not broke don't fix it.
Certainly there are issues, low interest rates elsewhere will always and has always reduced borrowing and I doubt that the movement ever experienced such a long period of low interest rates and yes it does reduce income, increases deposits and reduces dividend/ returns to members.Hi Paul
Do you not think it's very broke?
They have very few borrowers.
They are living off the returns on money put on deposit at fixed rates a few years ago.
They will have very little income over the next few years
And all those trips to Credit Union conferences around the World don't come cheap.
Brendan
Hi Paul
Do you not think it's very broke?
They have very few borrowers.
They are living off the returns on money put on deposit at fixed rates a few years ago.
They will have very little income over the next few years
And all those trips to Credit Union conferences around the World don't come cheap.
Brendan
Hi Paul
Do you not think it's very broke?
They have very few borrowers.
They are living off the returns on money put on deposit at fixed rates a few years ago.
They will have very little income over the next few years
And all those trips to Credit Union conferences around the World don't come cheap.
Brendan
They are struggling to an extent, "high street" interest rates are now probably lower, but , and I will stand corrected here, the interest on CU loans was/is a reducing balance interest calculation.Brendan I would of though they have loads of small too medium loans on there books Turing over good returns on the interest side ?
Very few Id say I know when I was involved interest income from bonds, almost exclusively sold by Davy then contributed a fair ball of money to income.I wonder how many credit unions cover their outgoings from loan interest income. Those credit unions are probably run well.
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