Savings

The credit union will resist any savings cap

RIGHT: Tom Allen, director of Mullingar Credit Union; outgoing president Paul Isdell; and assistant manager Derek Smith.

A cap on the amount members are allowed to keep in savings is not “at this time” being considered by Mullingar Credit Union, although some other credit unions across the country have had to impose limits.

“This is an area that we need to watch closely and we will need to take appropriate action if savings continue to increase at the same level as over the past two years,” the outgoing credit union president said. , Paul Isdel. members at their AGM, held online on Wednesday.

Credit union manager Tom Allen explained that the credit union would be reluctant to introduce a cap, but that it might become necessary: ​​“For 60 years we have tried to develop the credit union…to a level where it may be a viable alternative. to other financial institutions. So the view here is that the introduction of savings caps – particularly at levels seen in some other credit unions like €15,000 and €20,000 and €25,000 – seriously harms the ability of the credit union to provide a service, so it’s not something the board would want to do if it can be avoided.

The fund generated a surplus of €2.8 million over the year. “The business of a credit union is relatively simple,” said Paul Isdell, saying that it takes deposits from members and lends prudently to other members. However, over the past decade savings growth in Mullingar Credit Union – and indeed in the wider credit union movement – has far exceeded loan growth, which in the environment present, has created a number of problems.

“First of all, the excess savings that we don’t lend out, we have to invest, and the returns on investment for the credit union are very, very low. And in some cases we leave money on deposit with other banks and have to pay a negative rate – in other words, we are charged for leaving that money there right now,” said Mr. .Isdell.

In addition to this, the Central Bank requires the credit union to maintain its reserve-to-savings ratio at 10%: “So for every million euros of additional savings, €100,000 must be transferred to reserves.

Over the past year, savings increased by almost 40 million euros, but the surplus of 2.8 million euros was not enough to cover the required reserves of 4 million euros , following which the board of directors had decided not to recommend a dividend or an interest subsidy.

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Mr Isdell said he was pleased to report that loans had increased and interest was providing the credit union with around two-thirds of its income, demonstrating how essential it was for the institution to have a solid and prudent loan portfolio.

On a less positive note, Mr Isdell said the board had to make a difficult decision to reduce the life insurance available for members’ savings. The maximum life insurance on savings was €12,700 and this is now reduced to €3,000. “No changes have been made to life insurance versus lending,” he added.

Mr Isdell sent his best wishes to three outgoing board members, Seamus McLoughlin, James Marshall and Henry King, whose contributions could not, he said, be overstated. He also welcomed their replacements, Mark Rafferty, Eugene Dunne and Brendan McGeogh.