Central Bank’s ‘concern’ over Newbridge Credit Union

The Central Bank has said its decision to appoint a ‘special manager’ to Newbridge Credit Union was because the “credit unions regulatory reserves were below the required level” and “there were concerns about its financial position”. The observations were noted in its annual report published last Monday 21 May.

The Central Bank has said its decision to appoint a ‘special manager’ to Newbridge Credit Union was because the “credit unions regulatory reserves were below the required level” and “there were concerns about its financial position”. The observations were noted in its annual report published last Monday 21 May.

A court appointed “special manager” took over the complete running of Newbridge Credit Union last January following an application by the Central Bank to the Commercial Court in Dublin.

The special manager was tasked with managing the day-to-day running of the credit union and developing a plan to restore its financial position. This was the first action by the Bank under the Central Bank and Credit Institutions (Resolution) Act 2011.

“The Bank will continue to take the necessary actions to resolve weak and non-viable credit unions which it identifies in order to protect members’ savings and maintain the financial stability of the sector,” the annual report noted.

It said the credit union sector overall continued to face significant challenges in 2011. “Falling income, a rising cost base (which includes provisions for bad and doubtful debts) and continuing downward pressure on dividends are all indicators that the sector remains under significant financial stress. The continuing upward trends in the level of reported arrears remain a cause for concern, with the total arrears (over nine weeks) amounting to E1.02bn at 31 December 2011, representing 19.3 per cent of the loan book.”

Meanwhile, one in 10 home-owners in Kildare are in arrears with their mortgage. This is according to new national statistics also highlighted in the Central Bank Annual Report. This works out as many as 4,400 homeowners in the county.

Speaking at its launch, governor Patrick Honohan said the Central Bank is “not comfortable” with the high level of mortgage arrears but they were not unexpected, given the high level of household debt in the country.

It is currently pressing Ireland’s banks to carry out a detailed analysis of their mortgage books to find out which borrowers should voluntarily surrender properties and enter bankruptcy or change the terms of the loans if borrowers cannot repay them.

Mortgage lenders have also been asked to develop more skills and systems to understand and deal with the mortgage problems at the banks. The banks have struggled to cope as they had only “geared” to sell mortgages, said Mr Honohan. “The scale of the problem has overwhelmed the banks and they weren’t well prepared for it,” he said.

- Lisa Deeney