Credit unions to be hit with over €13m of losses following IBRC liquidation

A slew of sacred cows are presently being slain with the special liquidation of Irish Bank Resolution Corporation. We know that depositors will be nursing losses of at least €93m. And yesterday we learned that credit unions are taking a hit of at least €13.4m from their deposits at IBRC. Mind you, it seems that practically all of the senior bondholders will be paid in full, either because they have already been repaid or because they are covered by the Eligible Liabilities Guarantee.

Having asked the question several times previously on credit union losses at IBRC, yesterday the Opposition finally extracted an answer from Minister for Finance, Michael Noonan in the Dail.

Minister Noonan told Deputy Michael Moynihan from Fianna Fail and Deputy Dessie Ellis from Sinn Fein that 16 credit unions appear to have “invested” in IBRC bonds which are covered by the €100,000 deposit guarantee scheme. So a maximum of €1.6m will be protected and the credit unions are expected to shoulder the remaining loss which will be at least €13.4m. Remember Minister Noonan recently shoveled €250m into the credit unions mostly to cover losses on bad loans but these losses at IBRC will also cost us all.

The full questions and response are here:

Deputy Michael Moynihan: To ask the Minister for Finance if he has engaged with the credit union sector regarding the implications for fixed deposit investment products held by its members arising from the liquidation of the Irish Bank Resolution Corporation; the role of the regulator in protecting the interests of credit unions in the liquidation process; and if he will make a statement on the matter.

Deputy Dessie Ellis: To ask the Minister for Finance the total volume of Irish Credit Union deposits or bonds in the former Irish Bank Resolution Corporation and if he will outline the impact of the liquidation of IBRC on Credit Unions.

Minister for Finance, Michael Noonan:  I intend taking Question No 58 and Question No 61 together.

I am advised by the Central Bank of Ireland that certain tracker bonds sold to credit unions which were liabilities of IBRC at the time of the liquidation have a structured deposit element which is covered by the Deposit Guarantee Scheme for that element of the product. As a result the first €100,000 of any claim from these depositors is covered under the DGS. The bond itself is not covered by the ELG scheme as it predates that scheme.

I understand that the total amount of Credit Unions investment in the bond is of the order of €15 million and that 16 credit unions may be affected.  As part of their regulatory requirements, credit unions are required to maintain realised reserves for the purpose of absorbing unexpected losses, including from unguaranteed losses.  This should be the first line of defence in such circumstances. Officials from my Department have met with the Irish League of Credit Unions on this matter and the credit unions affected have been advised to deal with the Special Liquidator.

The Registrar of Credit Unions at the Central Bank of Ireland is the independent regulator for credit unions.  The Registrar acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members. It is a matter for the Registrar to engage with the credit unions affected in that context.