Ireland’s credit unions are in such dire straits that $1.3 billion in unused bank funds was recently approved to aid some of the country’s struggling cooperatives.
According to Reuters and other media outlets, Ireland Minister of Finance Michael Noonan said the Department of Finance recapitalized the banks for less than expected and as a result, the resources were there to use.
“I seriously intend sorting out the credit unions, and some of them we'll have to do immediately but we won't do it in one big bang,” Noonan said Oct. 6.
As far back as 2006, the Department of Finance may have known Ireland’s credit unions were on the brink of a financial downturn, according to an Oct. 9 article in the Sunday Business Post Online.
The regulator was supposedly warned about systemic risks and governance problems at the time but did not act soon enough to prevent them, said Bill Hobbs former chief executive of the Credit Union Development Association.
The registrar of credit unions at the time, Brendan Logue, submitted a draft to the department calling for a stabilization and deposit guarantee plan to protect members’ funds, the publication reported. However, the proposal did not move forward, which left only a $160 million fund run by the Irish league.
In 2007, Hobbs also warned officials that Ireland’s credit unions would not be adequately protected against financial shocks.
Former CUNA President/CEO Ralph Swoboda was at that meeting and expressed similar concerns, according to the Business Post article.
Swoboda later served as chair of the Association of British Credit Unions Ltd.’s management committee, the trade body for credit unions in England, Scotland and Wales.
“Credit unions in Ireland are under-regulated, and we should expect that situation to change with the imposition of new regulations,” Swoboda said in 2006, the publication reported. “Bad loans are another issue that will be addressed, with the actual situation probably considerably worse than is being reported.”