Consultation on €30m Credit Union stabilisation fund beginsWednesday 26 February 2014 16.32
The Department of Finance is proposing a levy on credit unions to contribute towards a €30m "stabilisation fund" to address a shortfall in reserves at some, otherwise viable, institutions.
The proposal is set out in a consultation paper published by the Department which is seeking views from Credit Unions prior to making a final decision on the levy at the end of April.
The Department proposes the levy would raise €5m a year until a fund of €30m is accumulated. The funds would be applied to credit unions which have a level of reserves below the statutory minimum level of 10% of overall assets but above 7.5% of their assets.
There are 20 credit unions in this situation. The introduction of stabilisation support for credit unions was recommended in the report of the Commission on Credit Unions and has was legislated for in 2012.
The Minister for Finance can provide stabilisation support to a credit union where it has been approved by the Central Bank.
The Department of Finance is seeking views on whether this levy should be a flat fee paid by each of the country's 390 credit unions regardless of their size or whether it should be based on assets. A flat levy would work out as €12,800 per credit union each year.
Irish credit unions have arrears of €817m equivalent to around 19% of their outstanding loans.
A number of credit unions are expected to complete mergers before the end of this year. At present 52 are engaged in active merger discussions.