Tax payers could bail out Newbridge Credit Union

Newbridge Credit Union must carry the cost of the 12-month appointment of a special manager and his team to the financially troubled institution.

Newbridge Credit Union must carry the cost of the 12-month appointment of a special manager and his team to the financially troubled institution.

However, if there is not enough funds to do so or if the credit union needs a further injection of funds, it will be the tax payer who will bail out the credit union until it has adequate reserve levels once more.

Newbridge Credit Union’s special manager, Luke Charleton of Ernst and Young, whose appointment has been extended for a year until January 2013 to protect members’ savings, has been running the Credit Union on an hourly rate of €423 for the past six months.

The Finance Minister Michael Noonan has set aside €250m this year and the same again for next year to fund struggling credit unions with a long term view to merge them with “stronger ones” - although there has been no draw down on the resolution fund to date from any credit union.

According to the recent report of the Commission on Credit Unions, “exchequer funding” will be provided on a “recoupable basis” once there is no longer any available excess captial within the Credit Union.

Meanwhile, one of the major implications for Newbridge Credit Union in its current state is that it may be merged with a “stronger” credit union.

It was decided by the High Court to appoint the special manager on behalf of the Central Bank last January, because Newbridge Credit Union did not hold sufficient reserves to withstand expected heavy losses from loan defaults.

The Credit Union Commission found that loan arrears at the country’s 407 credit unions have risen to €1bn, almost triple the level of arrears in 2006 however the increase in provisions over the same period has increased four fold from €204m to €800m. Newbridge Credit Union is the third-largest community-based credit union in Ireland with 38,000 members and assets of €190 million.