The Irish League of Credit Unions (ILCU) has welcomed the introduction of new rules covering the amount of reserves credit unions must hold.
The new regulatory reserve ratio was circulated by the Registrar of Credit Unions today.
It comes after the Financial Regulator's annual report revealed that one in five credit unions has fallen below the levels set for capital reserves to protect them against rising loan losses.
Under the new rules, credit unions will be required to hold a regulatory reserve ratio of 10 per cent from the end of September.
However, for credit unions who will not reach 10pc by September 2009 the timeframe for implementation of the regulatory reserve ratio has been extended to 5 years.
For those credit unions there will be a phased implementation whereby the minimum regulatory reserve ratio to be held will be 7.5 per cent for September of this year increasing to 10 per cent by September 30th 2013.
Credit unions that do not meet the regulatory reserve ratio of 10 per cent, but generate a surplus, may with the approval of the registrar pay a dividend.
The ILCU said the extended timetable of implementation and ability to pay a dividend without holding a 10 per cent reserve ratio will give credit unions greater flexibility to comply with the new regulations.
“We (ILCU) are delighted to have made such progress on the regulatory reserve ratio on behalf of credit unions. This new timetable gives credit unions the increased flexibility to comply with the regulators requirements. In addition we are pleased that it is planned that from October 2010 credit unions who meet the relevant criteria will have an option to calculate their regulatory reserve ration based on risk profile analysis. We are satisfied that the outcome of these negotiations is the best result for our members," said ICLU president Mark Bailey.
