Madam, – In response to an article “Anglo write-down hits credit union” (Finance, December 9th) the Irish League of Credit Unions would like to clarify a number of issues in relation to credit union bond holdings in Anglo Irish Bank.
First, only a small number of credit unions hold subordinated bank bonds with Anglo Irish Bank. Subordinated bank bonds with Anglo Irish Bank total €4.8m. The €28 million figure quoted in your article is the total figure of credit union investments in Anglo nationwide.
Second, the Registrar of Credit Unions Guidance Note on investments requires that, “investments in a single institution shall not exceed 25 per cent of the total value of the credit union’s investment portfolio”. Therefore, credit unions are required to diversify their investment portfolio among banks and due to the recent departure of banks from the Irish market their options on where to place their deposits have narrowed considerably.
In late October 2010 Anglo Irish Bank announced that it is offering to issue new bonds to subordinated bondholders at 20 per cent of the original value of the bonds. Up until that announcement the subordinated bonds in Anglo Irish Bank were guaranteed by the Irish Government and credit unions holding these bonds had no reason to be concerned about this investment. Now however, as a result of this unforeseen announcement it means that their investments will incur a loss.
This investment loss is a once-off and will be realised by all credit unions holding these investments in this year’s accounts. Credit unions are working hard to continue to deliver services to their valued members and are working to strengthen and maintain their record of service of over 50 years to members. – Yours, etc,