17 Aug 2022

Credit union loses €2.5m as a ‘burned’ bondholder

St Canice’s Credit Union suffered losses of €2.5 million when the AIB and Bank of Ireland bond holders were “burned” earlier this year, members were told at the annual general meeting on Wednesday night.

This amount is equivalent to a dividend of 1.25% that could have been paid to members. The actual dividend being paid out this year is 0.25%, which many members considered unsatisfactory, although the St Canice’s management pointed out that many credit unions are paying no dividends at all this year.

The accounts for the year ended September 30, 2011 show a “loss on disposal of investments” amounting to €2,569,627.

These were “previously guaranteed bonds losses imposed on us as a result of a Government change in legislation,” treasurer Eamon McArdle told credit union members.

Asked which banks the bonds had been for, he replied: “Those were AIB and Bank of Ireland” and he said the losses “resulted from the Government and EU-required recapitalisation” of the two banks.

“Those bonds were purchased some years ago, long before the downturn in 2008. At that stage they were due to mature in 2014 and they were capital guaranteed,” Mr McArdle said. “We got a very good rate on those, but unfortunately due to the Government-changed legislation ... we were forced to dispose of them at a loss of €2.5 million. We are not alone in this.”Mallow Credit Union in Cork, for example, had losses “to the tune of €5 million”, he said.

“We entered into those on the basis that our capital was guaranteed but unfortunately the legislation changed and there is nothing we can do about that,” he told members. Up to that stage, the bonds were paying a rate of nearly 30%, Mr McArdle said.

Asked whether the present Government or the previous one was responsible for the change, he said it had been put in place by the previous Government but implemented by the present one.

St Canice’s Credit Union also wrote off €2.5 million during the financial year, involving 311 accounts – an average amount of €8,000 per write-off.

Those at the top table reassured members, however, that those debts would still be pursued for repayment. It was also noted that the credit union recovered €597,941 in debts that were previously written off.“All debts are pursued rigorously,” Mr McArdle said.

Just over €24 million’s worth of loans were made to St Canice’s Credit Union members during the year, the most common being for household goods (2,493 loans), home improvements (1,404 loans) and vehicle loans (1,069 loans). The total amount loaned out was €6 million less than in the previous year, according to Credit Committee chairman Liam Heffernan. “Yet each of these loans taken out represents something positive,” he said.

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