How Safe Are Credit Union Deposits?

I have 5 or 6 grand lying in an account in my local credit union. I know I should shop around for a better rate, etc., but my main concern is deposit safety.

Are deposits in credit unions safe in the current climate? If not, and you would recommend I withdraw it, where should I move the money to? Thanks.

It depends on if your credit union is a member of the Irish league of credit unions or is going it alone, also depends on how strong their financial accounts are, it is a personal view but a better rate and increased security is possible by moving, check out the best buys thread, it is your decision whether to invest your funds in an institution covered by the Irish State guarantee up to the first 100k or another non Irish institution.

I have a similar worry myself, I've 10k in a local credit union and am worried about deposit safety. At least the banks have a guarantee (for what it's worth) but how safe are the CU's?

Plumbob said:

I have a similar worry myself, I've 10k in a local credit union and am worried about deposit safety. At least the banks have a guarantee (for what it's worth) but how safe are the CU's?

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Credit Union deposits are covered up to €100k also.

Mebs said:

I have 5 or 6 grand lying in an account in my local credit union. I know I should shop around for a better rate, etc., but my main concern is deposit safety.

Are deposits in credit unions safe in the current climate? If not, and you would recommend I withdraw it, where should I move the money to? Thanks.

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Should you shop around? yes. There are much better deals out there than low or zero rates in credit unions.

As per a recent Irish Times article, there are solvency issues in many credit unions.

If you move your money out of the CU you gain greater safety and a better rate. Have you considered Nationwide UK?

Thank you all for your replies. Yes the credit union is a member of the Irish League of Credit Unions and has large deposits of cash but I do know that there has been a few repayment defaults of late, like most institutions.

I had considered moving it to Rabobank but having to do it all online, etc. is putting me off. Ciaran, have Nationwide UK any branches in the Republic?

Their Office is at 3 Spenser Dock, North Wall Quay.

As far as I recall, they will open a branch on Merrion Row in the next few weeks (near Department of Finance new offices!).

Yeah, spot on. So, one branch for the moment (unlike Rabo they will talk to you face to face in their HQ in Spenser Dock) and one on the way.

One thought is that most credit unions have their AGM in the coming weeks and apply dividends after that. It may be the case that the dividend is zero or it may be 2-3%. You may lose that if you withdraw your shares before the AGM date or date of application of dividends.

Out of interest I must check if dividends are applied to accounts that closed during the year or only to accounts that are open at the end of the year?

Most will be zero or very close to zero.

True, but some will be 2-3% so it is worth checking before closing an account, it costs nothing to ask. I am in line for 2% if approved at an AGM so there are credit unions that are not in a mess.

I believe that most credit unions will pay a dividend this year. Nobody can say authoritatively at this stage, as few, if any Credit Unions have held their AGMs - to suggest otherwise is nothing more than speculation. All savings in Credit Unions, up to €100,000, are covered by the Deposit Guarantee Scheme. In addition, 400 of the Republic's 411 credit unions are covered by the I.L.C.U. Savings Protection Stabilization Scheme, which intervenes if a credit union experiences trading difficulties. This scheme is owned and funded by the Credit Unions, and acts as an additional protection. The Financial Regulator, through the Registrar of Credit Unions, has been engaged in a very rigorous and ongoing regulatory inspection regime for the past 12 months in particular, and credit unions have been ramping up Provisions against possible future loan defaults. If the banking system had been subjected to the same level of scrutiny that Mr. Logue (former Registrar) and his successor Mr. O'Brien (current Registrar) has visited on Credit Unions since 2005, the banking sector would not be in the mess it is in. Credit Unions have been prioritizing reserves and provisions over dividends, resulting from this "tough love". To date, two years into the financial crisis, not a single credit union has required a cent of tax-payer money, something the journalistic community have neglected to point out. Sure, credit unions are feeling the pain that their members are feeling, but this isn't the first recession they have lived through, and I suspect it won't be the last.

The Credit Union financial year commences on 1 October annually and ends on 30 September of the following year. Dividend is calculated, based upon daily funds held. Thus, if savings are held in an account for part of the year, dividend will be calculated proportionate to the balances held and the duration for which they are held, similar to how deposit interest is calculated in an on-demand bank deposit account.

Credit union loan losses bite home

@seabhac - you sure the balance is not averaged in a month with some or caculated the lowest balance in the month with others? What happens if an account is closed during the year?

And don't forget the favorable tax treatment of credit unions which means their entire reserve base has been accumulated from a tax subsidy provided by the state.

Last I read ILCU's scheme was already committed to the tune of €45m with more calls to come. Seems 15 are [broken link removed]so that leaves €

Yup you are right about the regulatory inspection that forced credit unions to make [broken link removed]and found that they were on average 40% underprovided.

Have a gander at this headline from the Indo on increase in provisions to €20m

Well I received the relevant reports etc and notice of AGM from my credit union this morning. Seems quite strong to me - also well run. They are recommending a 2.5% dividend. I'm quite happy with it.

as safe as houses!

@Oltimer - you get the other 418 sets of accounts as well? One swallow doth not a summer make. Care to name your credit union?

Is it possible to get information as to the health of an individual Credit Union? I refer in particular to the one I joined last Summer. Do I just ask at the Counter or put a call into the ILCU?

cheers, LS.

No point in asking ILCU. Although you could try asking if it is or will be providing support to your credit union from its SPS bail out fund. If it says yes ask how much and let us know. ILCU applies the mushroom principle to credit union performance data.

Get a copy of your credit union's accounts for last year and this year (if available) and then it's over to you.

You have no way of determining or comparing performance between your credit union and others as that info is not provided by either the Central Bank or ILCU. Aggregated financial perfomance data by credit union size and type would be very useful- thing is both bodies could publish this type of info but won't. So much for transparency eh?

Mebs said:

..... but I do know that there has been a few repayment defaults of late, like most institutions.

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Can you be specific here? Do you mean loan defaults? I so, yes it is an industry wide problem.

What happens if CU cheques are not paid by AIB or BOI or whoever?

Slim