Healy O'Connor

Government Set to Inject up to €1bn into Credit Unions

The Government is prepared to pump up to €1 billion into the credit union sector to protect them against rising bad debts.

Minister for Finance Michael Noonan told the Seanad yesterday that he was prepared to inject between €500 million and €1 billion into the sector.

This will come from what remains of the €17.5 billion of State funds within the €85 billion bailout fund agreed with the EU and and the IMF not used to recapitalise the banks.

Some credit unions “are on the verge of failing”, said Mr Noonan, but he added problems in the sector would not be fixed in “one big bang”. Consultants working for the Central Bank have categorised 79 credit unions – about one in every five in the country – as “high risk”.

Credit unions have criticised lending curbs and dividend stoppers imposed by the Central Bank to protect them against increasing bad loans, claiming such measures were damaging their business. They have argued that they should not be regulated as heavily as the banks, which have cost the State €64 billion.

The Central Bank will continue merging vulnerable credit unions into strong institutions and pumping fresh funds into the merged entities.

A Department of Finance spokesman said the scale of the problems would determine if any public money injected could be recovered.

The number of credit union members missing repayments has tripled during the recession, causing alarm at the Central Bank. About 18.5 per cent of the €6 billion on loan from 407 credit unions is in arrears, according to the Central Bank.

“There is a future for the credit union sector but there are difficulties in there that need to be addressed,” said the registrar of credit unions at the Central Bank, James O’Brien.

Credit unions provide small loans to members but moved into property lending during the boom years.

The Irish Times, Friday 7th October 2011

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