THE FINANCIAL regulator has asked credit union representative associations to consider setting up an emergency fund that any struggling credit unions could draw on to cover their liquidity requirements over the coming months.
A spokeswoman for the regulator said it had been in touch with credit union organisations and has asked them "to consider putting in place arrangements for making funds available, should individual credit unions experience any liquidity requirements in the coming months".
Regulator Brendan Logue also wrote to credit unions in advance of their annual meetings, asking any unions having difficulties in paying dividends to make contact "to discuss their situation".
Concerns over investment losses and financial difficulties are thought to have prompted the regulator to raise the issue of a liquidity fund with representatives of the State's 420 credit unions.
The spokeswoman said in a statement that credit unions affiliated to the Irish League of Credit Unions (ILCU), which represents more than 521 credit unions in the North and South, "may wish to consider whether the savings protection scheme operated by the league would be a source of support in such a situation".
The ILCU's protection scheme operates a fund of more than €110 million to cover the credit unions in its organisation. The league has said the fund can be used to "protect members' savings by making available financial assistance to help any credit union which may experience difficulties".
Since the scheme was established in 1989, financial assistance has only occasionally been provided to a small number of credit unions to ensure their members' savings were protected.
The ILCU has said the scheme offers funds to affiliated credit unions "to allow them to trade out of any difficulty they may experience".
"If this were not possible - and in the unlikely event that a credit union became insolvent or defaulted financially so as to become unable to repay savings to members (deposits and shares) - the State guarantee of €100,000 would be available," the ILCU said in a recent statement.
In September, Minister for Finance Brian Lenihan increased the State deposit protection limit to €100,000 and included savings in credit unions under the scheme.
Credit unions were previously not covered by the deposit protection scheme. At the ILCU's discretion, savings could be covered only to a maximum of €12,700 by the league in the event of a credit union becoming insolvent.
The credit union regulator wrote to credit unions on October 9th telling them that they can only pay dividends out of a surplus for the year or from a reserve set aside in previous years for this purpose.
Mr Logue, who is registrar of credit unions, drew their attention to a section of the Credit Union Act 1997 governing the rule relating to "dividends on shares".
The average credit union deposit account has a balance of €4,620, according to the ILCU.
