DUBLIN, Ireland - Liam O'Dwyer, CEO of the Irish League of Credit Unions, says the country's CUs are not in jeopardy despite a series of events that led to a number of Irish newspapers questioning the stability of Irish credit unions.

A run on Monaghan Credit Union by its members was started when the IFRSA's (Irish Financial Services Regulatory Authority) Credit Union Regulator Brendan Logue ordered the credit union not to pay a dividend after the credit union wrote off 7.15 (US$9.23) million in historical bad debt.

Then there was the debate about ILCU's Savings Protection Scheme, the plan where ILCU maintains funds to reimburse members in case a credit union goes under up to _12,700 (US$16,396). This is less than the _20,000 (US$25,280) maximum offered by the Deposit Protection Scheme that is operated by the Irish Central Bank & Financial Services Authority in affiliation with IFSRA. Under European Union law financial institutions must have some type of savings protection plans.

The regulator has looked into bringing ILCU's SPS into a statutory position within the IFRSA, a move that ILCU has resisted. O'Dwyer explained the ILCU's alternative, "We want to make sure the SPS is put into a limited company with management by the movement." He, however, wants to see it "regulated by the regulator." Because ILCU believes it is important to stabilize credit unions in difficulty over the years, it has stepped in to help a few credit unions in difficulty often with expertise. However, O'Dwyer considers it a miniscule percentage of Ireland's 530 credit unions.

Bill Hobbs, CEO of the Credit Union Development Association, started by credit unions dissatisfied with ILCU, takes a different position. He said, "CUDA has advocated for an independent statutory savings guarantee scheme since its formation. The fact is that not one Euro of credit union savers' funds are guaranteed whereas upwards of _20,000 (US$25,280) in a bank or building society are. CUDA believes that it's imprudent for government to delay any longer in providing the depositor guarantee for credit union members that is already required by law." He added, "Credit unions would then be responsible for funding their participation on the same basis of other institutions. Savers with credit unions would immediately have the certainty of the same legal protection as prescribed for depositors generally under European standards."

Another series of negative articles were caused by ILCU's report to the regulator that identified some credit unions were having bad debt problems.

"Papers have blown it all out of proportion," O'Dwyer said about those articles. He pointed out that most credit union lending is unsecured. He says "out of a loan book _7.5 (US$9.6) billion the level of bad debt is _35 (US$45.1) million or .46%" Their target is .5%. Some credit unions were over the .5%. He also pointed out that ILCU has tightened its own standards, "because we felt it was prudent."

Hobbs was not quite as upbeat. He said, "Recent media revelations are disturbing, but not unsurprising and point to business issues that simply must be challenged and the necessary solutions identified and implemented. Undoubtedly it will lead to greater regulatory scrutiny.

Credit Union Times contacted the IFRSA, which refused to answer specific questions, but spokesperson Jill Forde issued this statement. "We will examine the findings of the recent report on debt with the ILCU. We are currently engaged with the ILCU on the development of a guidance note for the governance of credit." [email protected]