Credit union caps

The change in the economic climate of Ireland in the last few months has caused many money lending institutions to change their policies. Credit unions are among the most common to change, with the current amount totaling 36 unions all across the state.

The largest adjustment to these businesses are focused around savings accounts of current members. People who are utilizing these saving tools are now being asked to keep their savings below a certain amount.

Some of the caps imposed on these deposit accounts range from €15,000 to €40,000, causing major problems for many of the current users. If an account is above the cap amount, the account owner is required to find an alternative place to store these additional funds in less than a month.

One of the largest draws towards credit unions for people is the ability to get higher interest rates on savings and lower interest rates on loans. High interest rates can be very beneficial on savings but without a significant amount of funds able to be held in an account you will not be receiving enough to differentiate the union and the central bank.

There are many different factors that went into the creation of his strict saving policy. To begin, the Central Bank rules began requiring that credit unions keep on hand at least 10% of their assets in order to have a standardized regulation across Ireland.

Furthermore, Brexit and the projected heath of the economy have scared lenders from giving out loans without high rates. This in turn has decreased the supply of possible customers in the market. Without the usual spending and lend requests, credit unions are faced with an opposing issue, too much money.

Although credit unions operate as a not-for-profit, they are still in need of a decent amount of income from loans to be able to give their customers the monthly or yearly interest they have earned on their savings accounts. A huge reason why the cap is being put into place is because these businesses simply cannot afford to pay a hefty interest rate and dividend slip at the end of each term.

Overall, the lack of loans or inability  for their customers to get a loan has caused many credit unions to have to restrict the value of deposit accounts. In the future, these restrictions may disappear but for now they remain firm in hopes of matching this years income with the price of the interest on every ongoing account.  

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