DUBLIN, Ireland–Some credit unions in this country are turning away deposits and even urging current members to reduce their savings balances below €25,000.
“Credit union leaders said the savings-and-loans bodies were suffering from their own success, as members wanted to save with them rather than with the banks,” reported The Independent. “But high levels of savings at a time of muted demand for loans are causing problems for credit unions.”
An additional €800 million was saved in the country’s 286 credit unions last year, taking the total for the three million members to €13.3 billion in deposits, according to the Independent. But as the publication also explained, for every €100 in savings, €10 has to be put into the reserves. The money that goes into the reserves comes from profits made on loans.
Rathfarnham Credit Union CEO Al McCauley told the Independent it asked its 26,000 members to reduce their savings balances down to €50,000 last year. It was now considering a further reduction, to €25,000 a member.
St Anthony's and Claddagh in Galway said it is imposing a cap of €70,000 for new savings balances per member, the Independent reported, while Capital Credit Union, which emerged from the merger of Dundrum and Sandymount in Dublin, said it was restricting new savings to €30,000 per member.
Chief executive Gerry McConville said the limit would apply to new savings only. He said the credit union was restricted in how it could invest its funds, and was having to pay Bank of Ireland for deposits since the bank introduced negative interest rates for large deposits, the Independent reported.
"We are a product of our success. People want to put money into a credit union. They don't want anything to do with the banks. But we have to have 10pc of member savings in our reserves, and we are charged negative interest rates by the banks when we deposit our surplus funds with them," McConville told the Independent.
The Central Bank imposed a limit of €100,000 in savings per member two years ago, while also limiting investments to low-yielding investments, such as bonds and bank deposits.