Irish Times: Credit Unions Face Serious Solvency Issues

Hardly surprising; did anyone really expect that credit unions avoided the pitballs that banks got into? I remember a long time ago being skeptical of credit unions' assurances.
 
More solvency Issues

Savers get a zero return for their money at this credit Union ...

Credit union will pay no dividend after branch posts losses of €6m

http://www.independent.ie/business/...er-branch-posts-losses-of-euro6m-2349448.html

A CREDIT union in Tipperary has insisted that its members' money is safe after it recorded losses of €6m, was forced to put aside €9.3m to cover bad debts and has had to seek financial assistance from the League of Credit Unions.
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Accounts for 2009 show that it has been forced to avail of a guarantee of €3m from the league's savings-protection fund (SPS) -- a bail-out fund for credit unions that are experiencing funding problems.
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The credit union was forced to put aside €9.3m to cover bad debts last year. This represents 21pc of the total outstanding loans of the organisation,
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hot on the heels on 24th Sept 2010

http://www.independent.ie/national-...plays-down-key-changes-at-branch-2351262.html

Credit union group plays down key changes at branch

By Majella O'Sullivan

Friday September 24 2010

THE IRISH League of Credit Unions (ILCU) has moved to ease concerns about one of its branches, following the appointment of four new members to its board.
It is also understood that a senior official has stepped down at the branch.
A statement from the ILCU has confirmed that "an in-depth review" had taken place at Killorglin Credit Union, Co Kerry, in the past number of weeks.
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My local CU has not paid a dividend since 2007, well it was paid in january 2008 for the year 2007. I asked them on a number of occasions this year if it would be possible to get a copy of the AGM as i hadn't received one. On the first 2 occasions i was told by the guy that he would send it out. On the third occasion i was told they had not held it yet. I asked if they could tell me why (seeing as they are supposed to hold it between october and february)- no reply. So i phoned the FR and was informed that my local CU has been asked to hold off on having their AGM until a few issue have been sorted.
My savings are about 3 times my loan amount and i'm thinking it may be a good idea to clear the loan and withdraw my savings!
 
ILCU would want to come clean on how exposed its "discretionary" solvency bail-out fund is. It's got only €120m to fund losses in c€12.0bn in assets of which about €7bn is out in loans. The fund is also used to cover its 100 or so Northern Ireland member credit unions who are not covered under the UK depoist guarantee scheme - so ILCU says it offers a "discretionary guarantee" where it might, only if it helps out a credit union, pay out up to a paltry €12,000 if it fails. Problem is of course ILCU hasn't the financial standing to back a guarantee so it dresses up its wooly discretionary "pals" fund to make people think it offers a guarantee.

Earlier this year bad debts had reached 13% and were still climbing. The end of the year will see a lot more credit unions being told to hold off having AGM's until their solvency is assured which appears to have happened to about 20 this year.

Chasm - seems your credit union didn't inform you its agm had been delayed by under instructions of the regulator. It should have under law held its agm by the end of January unless instructed to do otherswise by the regulator. Are you saying that when you contacted your credit union for a copy of the AGM (which I take it means accounts for last year as well) you weren't told it hadn't been held yet? Naming the credit union here would allow its other members to understand what's happening.
 
kaplan said:
Are you saying that when you contacted your credit union for a copy of the AGM (which I take it means accounts for last year as well) you weren't told it hadn't been held yet? Naming the credit union here would allow its other members to understand what's happening.
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Kaplan, The first time i requested it, the guy asked was there anything specific i wished to know about, to which i said no, i just wanted to see the copy of the AGM. The Guy said he would send me out a copy in the post.
I hadnt heard anything for over a week so i went back in, (as i was also waiting for them to send out my passbook, which had been left in to be uupdated). I asked again about the copy of the AGM which i had requested on my last visit. The same guy was behind the counter as on the previous visit, and he just said "has it not been sent out yet?" and then said he'd locate one and send it out.

After another couple of weeks i went back in and asked and there was a young lady behind the counter. I asked her about the copy of the AGM and she said that the AGM had not been held yet.

The Credit union is Carrick-on-Shannon and district C/U
 
Interesting posts, just to throw a spanner into the C.U. discussion, you should ensure that the C.U. you deal with is a member of the Irish League of Credit Unions ( ICLU ), If it is you have some protection in the event of default, If it is not then in my opinion you should take your money out despite Govt G'tee and run, the risk is too great and the first thing you would hear of a problem is when the doors do not open......too late, check it out.
 
chasm said:
My local CU has not paid a dividend since 2007, well it was paid in january 2008 for the year 2007. I asked them on a number of occasions this year if it would be possible to get a copy of the AGM as i hadn't received one. On the first 2 occasions i was told by the guy that he would send it out. On the third occasion i was told they had not held it yet. I asked if they could tell me why (seeing as they are supposed to hold it between october and february)- no reply. So i phoned the FR and was informed that my local CU has been asked to hold off on having their AGM until a few issue have been sorted.
My savings are about 3 times my loan amount and i'm thinking it may be a good idea to clear the loan and withdraw my savings!
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So you are getting a 0% return from a CU that might be in difficulty. Is there any reason to keep your savings with them? Personally, I would move them in the morning to a safer place where you will get a return for your money.
 
CiaranT said:
Is there any reason to keep your savings with them?
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The credit union may be a local credit union that lends to your family and friends to purchase necessities. It may be the only source of finance to meet many needs of people in your locality. The social cost of the local credit union closing, due to a run on shares and deposits, may be judged to be a higher priority than the interest forgone by not moving the savings.

There is more to financial services than cost, if you make choices based only on interest rates you have to understand that there are individual and collective implications.
 
CiaranT said:
So you are getting a 0% return from a CU that might be in difficulty. Is there any reason to keep your savings with them? Personally, I would move them in the morning to a safer place where you will get a return for your money.
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TBH it was only when i looked at it recently that i realised that i had not received any interest since 2007. I am on a low income and i found them very handy to get loans from, (although my own bank seems to be happy enough to give me a loan in the last few years.) I think i may repay the last of the C/U loan and just leave a token amount in there just to keep the a/c open, in case they get their act together!
 
With the level's of arrears that have been reported by the CU's, are they really still lending today? especially to people on low incomes? From what I gather, CU loans are quite sparse right now due to the huge arrears and their very serious solvency problems.

Also, if you own bank is happy enough to give you a loan, then why not move your CU savings, to a safer home with a return on your money. It is good to see you are thinking about such a course of action.
 
Each credit union is different, there are many that are actively promoting loans at the moment and there are others who wouldn't be allowed to lend at all. You can't make genralisations about CUs in the same way that you do about banks. Banks don't care whether one bank manager was very diligent about risk in that last few years, they will apply guidelines across all branches.

Many low income people are looking for small loans to pay for a new washing machine or car insurance. I would speculate from some knowledge that the majority of bad debts accrued in credit unions were not from low income loans. In the same way as the EBS, credit unions, especially the big ones chased a lot of speculative property investment lending in the dying days of the celtic tiger.

I am unclear why you contend that the banks are a 'safer home'? Also how do you get banks to commit that they will be 'happy enough' to give you a loan in the future?
 
[broken link removed]

Loans in arrears for credit unions in the Irish League of Credit Unions increased to 14.9 per cent from 9.4 per cent in the year to June, according to figures released today.
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Is there a list available of the CUs that have been told to hold off on their AGMs?
 
In 2008, I had a large sum of money on deposit with my CU but when I decided to take out a loan for a much smaller amount than what I had on deposit they turned me down. I smelled a rat and removed my savings much to their annoyance.
 
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