The Irish League of Credit Unions (ILCU) has welcomed an announcement by the sector's watchdog about rules covering the amount of reserves credit unions must hold.

The Registrar of Credit Unions circulated details of the new Regulatory Reserve Ratio to credit unions nationwide today. The RRR represents the amount of funds held in reserve by unions, as a percentage of their total assets.

From September 30 this year, credit unions will be required to hold a Regulatory Reserve Ratio of 10%. But credit unions who will not reach 10% by that date will be given until September 2013 to do so.

For those credit unions there will be a phased implementation, under which the minimum Regulatory Reserve Ratio to be held will be 7.5% for September 2009 increasing to 10% by September 30 2013.

Credit unions that do not meet the 10% target, but generate a surplus, will be allowed to pay a dividend with the approval of the Registrar. 'The extended timetable of implementation and ability to pay a dividend without holding an RRR of 10% will give credit unions greater flexibility to comply with the new regulations,' said the ILCU.