The Government recognizes the important role of credit unions as a volunteer co-operative movement and the distinction between them and other types of financial institutions. The priority is to protect members of credit unions and their savings, the financial stability of credit unions and the sector overall. This is the starting point for all decision making when it comes to dealing with Credit Unions who are in difficulties and who can no longer operate on a standalone basis.
The Central Bank is the independent regulator of Credit Unions and its role includes taking resolution action where absolutely necessary via a High Court process. The Minister for Finance’s role is that of a consultee and his agreement is required for the payment of a financial incentive where that is requested by the Governor of the Central Bank.
The Central Bank has now been granted a High Court order to resolve the difficulties in Newbridge Credit Union by way of a Transfer Order and as part of this process requested the Minister’s agreement for the payment of a financial incentive. The Minster considered this request on the basis of: the protection of members’ savings and deposits, avoiding liquidation and its very negative consequences, and minimising the costs of any resolution to taxpayers.
The Government's first priority in assessing the Central Bank’s proposal on Newbridge was to protect the savings of depositors and members of Newbridge Credit Unions.Today’s action by the Central Bank of Ireland protects and secures the savings of all of the depositors and members of Newbridge Credit Union. Members of Newbridge Credit Union will continue to have full and uninterrupted access to their savings.
The Government’s second priority was to prevent the liquidation of Newbridge Credit Union due to the negative impact this would have on the members and their locality and also due to the wider implications for the credit union movement overall.
The preferred option to achieve these priorities was to combine Newbridge Credit Union with another Credit Union. This would protect the savings, prevent the liquidation and ensure a continued Credit Union presence in Newbridge. Such a combination would have been funded from the resolution fund at substantial cost to the taxpayer. Significant work was undertaken to combine Newbridge Credit Union with another credit union. Unfortunately, the withdrawal of Naas Credit Union, the final credit union to seriously consider this option, from the process in the past week has meant that this option was no longer viable. We appreciate Naas’ efforts in exploring the possibility of providing assistance in this situation.
Therefore, in order to prevent liquidation it is welcome that Permanent TSB is stepping in to provide such valuable assistance to the Newbridge members.
The significant level of support from the Resolution Fund that is required to protect Newbridge Credit Union members illustrates the Government's absolute determination to protect credit union members and, where a viable alternative exists, to prevent liquidation. Unfortunately, the cost to the Fund of rescuing this Credit Union will be significant. However, the cost of this combination with Permanent TSB will be significantly below the cost of the alternative combination with another credit union.
The Government is absolutely determined to support a strengthened and growing credit union movement and would encourage the movement to work with its stronger credit unions so they can provide a viable option for assisting weaker credit unions. In particular, the Government would like to highlight its support for the future return of a credit union to Newbridge.