Fianna Fáil Finance spokesperson Michael McGrath has stated that the sudden decision today to put Berehaven credit union in Cork in to liquidation will come as a shock to savers locally and throughout the country and is also a sharp reminder of the challenges facing the sector generally.
Deputy McGrath said: “When the problems at Newbridge reached a crunch point last November the State facilitated its takeover by PermanentTSB with the Credit Union Resolution Fund providing the necessary capital to meet the shortfall on the balance sheet. This prevented an immediate liquidation of the credit union occurring with the consequent risk of loss for depositors. I am calling on the Central Bank to indicate why a similar course of action has not been followed on this occasion.”
“The credit union sector is one of our great strengths as a country. Ireland has more credit union members per head of population than any other country in the world. Despite their difficulties credit unions have shown determination to retain the character and identity of the sector taking account of the ‘not for profit’ and volunteer ethos. Credit unions remained open for business throughout the financial crisis and unlike other institutions, continued providing loans to their members.
“However it is clear that a number of credit unions are in need of stabilisation or resolution action. Mergers of some small credit unions are inevitable but the process has been very slow to date. It is my view that the Central Bank should come up with a protocol of what constitutes a viable credit union in a manner that respects the community based nature of the credit union movement.”
“The Deposit Guarantee Scheme operated by the Central Bank is a vital support for the banking and credit union sector. The Minister for Finance must provide up to date information as to the amount of deposits across institutions actually covered by the scheme and also those that are not. It should be clearly communicated to customers that in an eventually such as the one that has occurred in Berehaven if their deposit exceeds €100,000 in the case of a single depositor they are at risk of loss. Changes to EU rules which provide for the bail in of uninsured deposits and other creditors represent a significant change in how a financial institution that gets in to difficulty will be handled in future.”
“Given that there was a call on the Deposit Guarantee Scheme last year arising from the liquidation of IBRC and now a further draw on its funds it is an opportune time for the Minister for Finance to review the operation of the scheme and ensure that customers fully understand how it works.”