Questions and Answers
Why are you limiting/imposing a savings cap?
The Board of Killarney Credit Union took the difficult decision to limit savings to €30,000 per member account after a significant increase in the number of cash deposits made at the credit union and the knock-on implication this has had on the credit union’s ability to maintain the regulatory reserve set out by the Central Bank of Ireland, which is a minimum of 10% of our total assets.
This means that for every additional €100,000 of savings, we must allocate €10,000 from our surplus / profits to our Capital Reserve, and this can have the effect of depleting the amount available to pay a dividend at year end and roll our new services e.g current accounts etc
We also face the challenge of a low interest rate environment which is greatly reducing the investment income that Killarney Credit Union earns on its deposits. Due to the high level of on demand savings held by the credit union, over €22million of excess funds must be placed in investments which we are receiving a very low or zero interest rates. There is also the possibility that the credit union will be charged by the banks for taking deposits in the near future. Therefore, the low interest rate environment is also impacting on our ability to generate a surplus.
How many members will this affect?
This will affect approx. 600 member accounts in total which is only 2% of total membership.
What is the saving restriction? The credit union now has a saving restriction of €30,000 per member account. This means that each member can only have €30,000 on deposit with the credit union. If anyone currently has over that amount in savings here they will have to withdraw them to bring them to the €30,000 limit. Members who have less than €30,000 can increase their shares to €30,000 – but no more than that. Joint members can transfer funds to each other to bring their accounts under the 30k limit.
What about members with savings under €30,000?
If the member has less than €30,000 they are free to increase it to this amount, but to no more beyond this level. Staff will be tracking this to identify members that are reaching the limit and the member will be advised accordingly.
What about members with savings above €30,000?
Members above €30,000 are encouraged to withdraw funds to comply with this cap. Members in this category cannot make lodgements to their accounts until the balance goes below €30,000. Members will be encouraged to bring their savings down to the limit before the 30th September 2018.
How long will the cap last for? The Board of Killarney Credit Union will keep the savings restriction under constant review, if they make any decision to change the current cap, members will be informed.
Does this mean the credit union is in difficulty? No, this has no bearing on the day to day operations of the credit union. Killarney Credit Union is adequately capitalised at €12m and has assets of €113m. In the past year, savings have increased by 6% and stand at €99m –and we must meet the regulatory reserve of 10% of our total assets at all times.
Each time our savings increase, we have to allocate more money from our surplus funds to meet this regulatory reserve, therefore reducing the amount we have available to pay out a dividend or loan interest rebate. It also reduces the amount we can afford to invest in new services and new technology options that can benefit all our members.
To reduce the impact of this savings growth, the decision was reluctantly taken to limit savings to benefit the greater number of our members.
Will this affect the dividend offered? Last year Killarney Credit Union paid a dividend of .05%, worth €44,000 to members. While it is too early this year to determine what rate of dividend if any we will pay out, we will be communicating with members directly to inform them once we are in a position to do so.
Are my savings safe here? I can assure you that your savings remain safe and secure at Killarney Credit Union. We are a financially strong and stable credit union with €12m in capital reserves and €113m in assets. We made a surplus in 2017 of €609,601.
In addition, your savings continue to be guaranteed by the Government Deposit Guarantee Scheme up to €100,000.
Does this mean the credit union cannot give out loans? Killarney Credit Union is in a strong position to give out loans, subject to appropriate assessments being completed. Our ability to lend is in no way affected by the savings cap. We continue to provide valuable loan services to the local community.
I’m affected by the savings cap of €30,000, what will I do now?
You will receive a phone call from a credit union representative who will advise you of your options. You will be required to withdraw funds to bring them below the €30,000 cap, this can be done by cash, cheque or EFT. Please being ID (photo and current address) to undertake this transaction. We cannot give out financial advice to members on investment or other savings options. You are recommend to talk to your financial advisor.
I have received a letter advising me I am nearing the savings cap. How will this affect me?
Members who reach €30,000 in savings will be prevented from making further deposits until the balance on their account falls below €30,000 (this will apply to all cash, cheque and EFT transactions).
Please take note of your current balance and ensure that it does not exceed the €30,000 limit on savings. You may find out your current savings balance by contacting the credit union directly or by registering for online banking.