IRELAND’S CREDIT UNIONS could be next up to receive a taxpayer capital injection, under the results of stress tests to be brought to the Cabinet in the coming weeks.
The credit union sector recently underwent detailed stress tests under the terms of the EU-IMF memorandum of understanding – and finance minister Michael Noonan says the results will be contained in a plan that will shortly be brought to Cabinet for its approval.
Responding to a parliamentary question, Noonan said the government was preparing to take “pre-emptive remedial action to [...] protect the financial stability of the credit union sector” if the stress tests found that the State needed to take action.
In that light, the Department of Finance was preparing a plan to “underpin the solvency and viability of undercapitalised credit unions” – potentially indicating that the State may have to give local lenders a financial injection in order to insulate them from another financial shock.
An ILCU spokeswoman declined to comment on whether the credit union sector would require a public cash injection when contacted by TheJournal.ie.
The ILCU’s most recent Annual Report said the league’s 498 credit unions had a total loan book of €6.2bn, with total assets of €13.9bn and total savings of €11.9bn.
A capital injection into the credit union sector would likely see the State having to take on an ownership stake in individual lenders, in a manner similar to its takeover of some of Ireland’s mutually-owned building societies.
The Government is also to establish a Commission on Credit Unions, a measure agreed in the programme for government and approved by Cabinet two weeks ago.
That commission’s task will be to analyse the performance of the credit union movement and suggest regulatory changes to allow such lenders to flourish.
A formal establishment on the foundation of that commission, and confirmation of its terms of reference, could be published later this week.
Discussions between the Irish League of Credit Unions and the Central Bank, which hoped to come up with an “appropriate strategy to support the credit union movement,” began in late April.
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