Credit Unions in Trouble
- Thread starter KeyPoster
- Start date
C
Carey
Guest
Many of them are in trouble. They lent huge amounts of money that they cannot now reclaim.
Many were recklessly lending money to people who shouldn't have had loans.
Many were recklessly lending money to people who shouldn't have had loans.
Do you know this, or are you recklessly posting suppositions?
C
Carey
Guest
I knows this. I know of one that is extremely badly run by people not fit to run a corner shop let alone a credit union.
But is it that you are ony familiar with country CUs? Slim
credit unions the slow motion train wreck
Slim the "huge" fund you wrote of appears to have sprung a very large leak - of the alleged €125m (there's no independent corroboration of this value) it seems €45m has been soaked up guaranteeing loan loss insurance support for 15 credit unions of the 510+ ILCU says its scheme "protects".
This thread is analogous to watching a slow motion train wreck and you can just about hear the incontinence pads being unwrapped in board rooms across the country as reality dawns.
Meanwhile ILCU keeps saying organges(credit unions) are not as green as apples(banks) to deflect scrutiny of its own precarious financial condition
Slim the "huge" fund you wrote of appears to have sprung a very large leak - of the alleged €125m (there's no independent corroboration of this value) it seems €45m has been soaked up guaranteeing loan loss insurance support for 15 credit unions of the 510+ ILCU says its scheme "protects".
This thread is analogous to watching a slow motion train wreck and you can just about hear the incontinence pads being unwrapped in board rooms across the country as reality dawns.
Meanwhile ILCU keeps saying organges(credit unions) are not as green as apples(banks) to deflect scrutiny of its own precarious financial condition
The key to understanding the credit union crisis is not how many loans have gone bad but what the embedded value of the business in on a going and gone concern basis. On a gone concern basis a large number are insolvent as the losses incurred in unwinding short term unsecured troubled loan books would wipe out solvency overnight. On a going concern the key is to understand what the impact of loan losses will be over time - this is why there has been a massive amount of loan rescheduling as credit unions adopt a hope and see response - the hope to see their loans being repaid. But as they cannot control the outcome as there is nothing they can do to influence the loan repayment capacity of their borrowers, they must mark down the current value of their loans based on what they realistically (not optimistically) believe the loan loss experience will be and not just what the existing arrears figures are. Thus bad debt provisions are both backward - accounting for known losses and forward looking -accounting for losses likely to be incurred. Reserves are the backstop when foward projections undershoot actual experience.
Few have bitten this bitter bullet which is why the regulator is so concerned - it's finding significant underprovisioning which means of course that solvency is being massaged. Few credit union boards will realise they are effectively putting rotten meat into the freezer.
Few have bitten this bitter bullet which is why the regulator is so concerned - it's finding significant underprovisioning which means of course that solvency is being massaged. Few credit union boards will realise they are effectively putting rotten meat into the freezer.
I am a member of a credit union and I have noticed change over the years from the old co-operative ethos to a business run by a "professional manager" with no links to the community. It is similar to what happened to the farmers co-ops.
As for loans I wonder how many were given out to the families and cronies of board members for business purposes. And how many were given to board members in an outbreak of mutual back-slapping? Was there due diligence?
I worry about the future of the Credit Union Movement - that the hard work and sacrifice of founder members will go down the drain.
Maybe the time has come to put our C.U. savings under the mattress!
As for loans I wonder how many were given out to the families and cronies of board members for business purposes. And how many were given to board members in an outbreak of mutual back-slapping? Was there due diligence?
I worry about the future of the Credit Union Movement - that the hard work and sacrifice of founder members will go down the drain.
Maybe the time has come to put our C.U. savings under the mattress!
Complainer
Registered User
- Messages
- 4,949
Or maybe to go to the AGM and voice your concerns? Or bring along a posse and get yourself elected as director, and fix it from the inside?
The value of loans to Officers/Board is disclosed in the year end accounts that must be given to all members. Usually in the 'Notes' section under a heading "RELATED PARTY TRANSACTIONS".
HTH
H
Hoipolloi
Guest
Does anyone know what the situation is re Credit Unions and the IMF, in the event that the Govt goes that route? Would it be worth putting a couple of bob into a CU a/c - as far as I know they're separate entities from the banks and possibly wouldn't have their deposits frozen in the event that the Govt/IMF took that action to preventa run on bank deposits. This is, of course, presuming the CUs don't collapse in the meantime!
Credit Unions do not have clearing facilities so just like you and me they have bank accounts. Different credit unions use different banks depending on what is 'local'. Of the credit unions I know, they have a relationship with only one bank but buy a variety of investment products from organisations such as Davy's as we have seen in the news. I would be interested to know if many credit unions have moved their funds to non Irish banks or diversified their banking relationships.
If the banks had failed, many credit unions would have closed the same day as the money in the safe in the credit union would have run out in 10 minutes.
H
Hoipolloi
Guest
Thanks for that - I'll leave the few bob where it is and rely on the kindness of strangers ...
So I should see Seanie Fitzpatrick's loans from Anglo in the Related Party Notes in their accounts
Yes I suppose there is no guarantee that the notes aren't opaque. You do have to rely on the fact that:
"...auditors should be alert for evidence of material related party transactions that are not included in the information provided by the directors...
...Nevertheless auditors should be alert for evidence of transactions that appear unusual, such as:...
- ...
- (e) unusual transactions that are entered into shortly before or after the end of the accounting period..."
I can see the audit team now:
Member 1: I think there might be a problem with the directors loans in this bank
Member 2 (looks up from computer): Wha? Don't worry about that - the bank is grand. C'mere - how many marks out of 10 would you give this blond trainee?
Member 1: I think there might be a problem with the directors loans in this bank
Member 2 (looks up from computer): Wha? Don't worry about that - the bank is grand. C'mere - how many marks out of 10 would you give this blond trainee?
Credit unions are the same as any ordinary business when it coms to exposure to bank closures. They put their money on deposit with the banks- most of it is on deposit with Irish covered banks. If the banks were closed credit unions money/liquidity would be locked up and they would have to be closed as well. Few realise how close credit unions came to a crisis during the run on the Rock in 2007 during which they had quite a deal on deposit. Had that bank been shut down the resulant liquidity shock could have triggered a run on credit unions here. Funny thing is when you put say €10000 into a credit union €6000 is put on deposit by it with one of the banks - the other €4000 is lent out. In effect they act as retail deposit gatherers for the banking system - Now consider your €10000: your credit union probably pay you 0.25%-0.50% if you are lucky this year - what would a bank pay you? Credit unions are quite dysfunctional intermediaries. They can't generate safe loans so they put peoples hard earned money on deposit with the banks earning 4% and pay their savers less that 0.50%
That is very useful to know! Many thanks!
@paddyman the info is about as useful as a bucket with a hole in it. What's needed is full disclosure on all loans, by category (type and size) setting out incurred and anticipated bad debt provisions, both specific and general provisions along with write downs and anticipated write downs. The info should also include rescheduled loans and attaching bad debt provisions. Transparency will expose just how bad things are and will become. Right now credit unions and their trade body ILCU are hiding behind accounting standards designed on the [broken link removed]- keep your members in the dark and feed them a diet of rhetoric.
Kaplan [broken link removed]
Kaplan [broken link removed]
Complainer
Registered User
- Messages
- 4,949
News from Newbridge;