The Irish credit resolution scheme, which provides for the orderly winding-up of credit unions, has been extended until the end of the year.
Yesterday, the European Commission approved the prolongation of the scheme, which was originally introduced in December 2011 and has been prolonged several times, the last time in December 2015.
The objective is to safeguard financial stability and protect the interests of depositors when a credit union is unable to meet regulatory requirements. The scheme allows the State to provide aid for transferring the assets and liabilities of a failing credit union to an acquirer through a competitive process to help achieve the maximum value possible.
It also ensures a failing credit union adequately contributes to the wind-down costs and the competitive process prevents a buyer from gaining an undue economic advantage through the acquisition of underpriced assets.
State aid rules
The commission has concluded the scheme was in line with EU state aid rules and in particular with its guidelines on state aid to banks during the crisis.
According to the commission, “the measure is limited in time and scope, ensures adequate burden-sharing and contains safeguards to avoid undue distortions of competition”.
The resolution scheme also includes a €250 million resolution fund. So far, the fund's resources have been utilised on three resolution cases concerning credit unions: Newbridge Credit Union Limited; Howth Sutton Credit Union Limited; and Berehaven Credit Union Limited.
Missing funds
The prolongation of the scheme come shortly after it was revealed investigations have begun into missing funds at the Rush
Credit Union
in north Co Dublin.
The Central Bank said earlier this month it was working with Grant Thornton, the accountancy firm, which is undertaking a review on behalf of the board. Up to €700,000 could be missing, it is believed, though customers have been assured they will not face loss.
Renewal of the scheme also comes as it was confirmed yesterday Mallow has become the 100th credit union in Ireland to go live with the Credit Union Service Organisation for Payments (Cusop) facility.
Cusop transactions
Cusop was established in 2013. Credit unions using the service can provide credit transfer and direct debit payments straight to member accounts. In the first quarter of 2016, Cusop processed over one million Single Euro Payments Area (Sepa) transactions and it is forecast to process over five million this year.
