# Are Credit Unions Bond Holders?



## Lee Fields (2 Mar 2011)

I hear politicians regularly describe Credit Unions as bond holders. Is this an accurate description?

Is the speculation that Credit Unions are in a financially vulnerable position also accurate?

What about the view that their predicament is related to decisions to depart from traditional depositing practices?


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## kaplan (2 Mar 2011)

Credit unions have investments in bonds - the most notorious being perpetual bonds. No one knows what their holdings of covered bank bonds are at this time. 

ILCU and its partner Davy actively marketed bond holdings in the mid naughties. ILCU even went to bat for certain perpetual bonds at one time when their suitablity for credit unions was being questioned (late 2006 /early 2007) and admitted it had 10% of its Stablisation Fund invested in them. 

Credit unions have already largely accounted for losses on perpetuals and other subordinated bonds. But it seems no credit union has been taken to task by the regulator for making investments it should not have made, even where the investments breached the laws and guildelines governing permitted investments.

Credit unions are in a fragile financial position. 

Their predicament is down to a bad governance and management, a redundant business model, making investments they should never have made,bad lending practices and failure to build reserves. Together with the economic crisis and sub-prime loan book pathology it all amounts to a perfect storm.


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## Lee Fields (3 Mar 2011)

Thanks, Kaplan.


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## kaplan (5 Mar 2011)

Analysis of ILCU's opaque data for year end 2008 shows credit unions having excess funds of c€6bn of which €2.7bn was held in 1-5yr and 5yr+ maturities. Of these at least €1bn was invested in bank bonds. Bank deposits accounted for c€3.6bn. ILCU data excludes non-affiliates who are either members of CUDA or non-aligned. Bond holdings are likely to be €1bn and €1.5bn


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