The Irish League of Credit Unions has said a number of its members will not be able to pay a dividend for the 2009 financial year because of the big fall in the value of investments.
Chief executive Kieron Brennan said individual credit unions would have to make adjustments to their accounts because of the lower value of some investments, and this would lower their trading surplus.
But he said this should not be taken as an indication of any serious problems in the movement in general, which remained 'financially robust'. ILCU president Uel Adair said the financial crisis had transformed what seemed low risk investments - such as bank bonds - into high risk.
Last year, stockbroker Davy agreed to address concerns about the performance of bonds which it sold to some credit unions. These bonds, which subsequently fell in value, sparked a legal battle between Davy and the Financial Services Ombudsman after he ruled that the sale of the bonds to one credit union was unsuitable. The High Court later quashed the Ombudsman's ruling.
The ILCU said credit unions' assets are worth double their loans and no credit union is at risk of going under. The recession has presented challenges to some branches - the sector's regulator recently told Mitchelstown Credit Union to stop lending to businesses and is also keeping 10 branches under scrutiny. The ILCU points out that these are a minority of more than 500 branches. Credit unions wrote off €50m of bad debts last year - though they set aside €230m to cover potential bad debts.
The comments on the credit unions' prospects for 2009 came as the ILCU published results for the 2008 financial year, which show that loans grew by 6.7% to €7 billion, though savings were only stable at €11.9 billion. The average credit union loan in the Republic was €8,860, up 8.7% from 2007.
Almost 60% of credit unions paid dividends of between 2% and 3.99%, with 4.4% paying between 4% and 5.25%.
