Gordon Gekko
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The problem is much simpler than people are making out. The credit unions earn negative returns on the deposits and then not enough customers borrow. They should pass those negative returns on to customers.
Let us be clear why CUs are seeking to cap Shares and Savings.
It is because of the lunacy of the conjured up Reserve Ratio of 10% against ALL Assets.
So when CU get €100k in Shares (liability) they have also an Asset (bank or even government bonds) and because of the increased asset - they must hold 10% reserve.
This reserve is only out of retained profits
The fact that they increasing or not increasing lending is irrelevant.
If the ratio was 4% -no bank would have needed rescue. There is a basis for that size of ratio. Not 2.5 times that again.
There is no academic research supporting a ratio of this level. It is an entire fiction but the hapless ILCU do not seem to know how to take on CBI on fictions.
I agree but the reputational risk is seen as too high, especially when no bank has passed on negative rates to Joe and Jane Bloggs (yet!). They should definitely explore some sort of happy medium. You could have savings up to some nominal amount earning nothing (e.g. €10k) with anything above this is put into a deposit account earning a rate linked to their average reinvestment rate.
No, you're confusing banks and credit unions.Just on this - I think there are two separate issues being confused / conflated.
Credit unions don't risk weight their assets. It's based on total assets.
Ah, there are many reasons the regulator stops credit unions doing certain things. In reality not all credit unions are the same, but they all get tarred with the same brush when it comes to decisions.Isn't this also why regulators have been wary of letting CUs get into the mortgage business?
They can....they posted me a cheque during the week. Have opened a post office book account. Will be using the money soon for refurbishment but will there be consequences for lodging over 10k in a post office book account?It's not clear. My own interpretation of the Credit Union Act is that they can but I have seen opinions to the contrary. I think they could impose a cap on share accounts (savings) and do the following:
Most credit unions introduced caps on savings but allowed members to keep their existing balances at the date it took effect - this had limited impact on slowing the growth as most growth was driven by an accumulation across lower balances. There appears to be very little appetite for a savings cap as low as would be required to minimise this sort of growth so many are now examining returning savings to members above their cap. This is complicated by the fact that they need co-operation to achieve this and they can't physically force someone to do an EFT, withdraw money or cash a cheque. They should probably impose low enough caps and hope for high levels of compliance.
- Request members to withdraw excess savings above €XX,000 by a certain date,
- Where the balance has not been reduced below the cap transfer the excess balance to a deposit account which will be subject to a negative interest rate.
I think it's probably unlikely that they will start applying negative interest rates because of the huge reputational risks, but at this stage, who knows? Some will probably have no choice.
No there shouldn’t be as long as you have proof of where the money came from too satisfy money laundering regulationsThey can....they posted me a cheque during the week. Have opened a post office book account. Will be using the money soon for refurbishment but will there be consequences for lodging over 10k in a post office book account?
Where could you put money over balance being capped ? Safely , without losing value - uncle has 50 k over - balance capped - he is very worries this is his money for emergency- peace of mindSome Credit Unions Now Capping Balances at €15,000.
Irish times article here.
This is obviously a direct consequence of negative interest rates.
You'll have to read some of the other threads in the banking/deposit/investment forums as there's no easy answer.Where could you put money over balance being capped ? Safely , without losing value - uncle has 50 k over - balance capped - he is very worries this is his money for emergency- peace of mind
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