Savings Cap and What it means for Our Members
In recent years, Ballaghaderreen CU has experienced an unprecedented level of growth in member savings. In some instances we have witnessed members withdrawing sums of money from other financial institutions and placing these funds in their Credit Union account. While we welcome this strong show of confidence in our financial strength and loyalty from our members, this can have a negative effect on new services and product provision and ultimately reduce our ability to effectively service our member needs.
The decision to introduce a saving cap three years ago was taken with due consideration and deliberation by the Board of Directors. The maximum share balance for an individual is €15,000 or shares held jointly €15,000. No member can exceed the maximum holding of €15,000 either through a single/joint account. We also have a monthly savings lodgement cap of €2,500 in place. All new members cannot hold more that €10,000 in their account. This prudent decision was taken in the best interests of all our members to protect the capital base of the credit union. The saving restrictions currently affects only a small proportion of Credit Union members.
Why a Savings Cap?
Tighter regulatory requirements by the Central Bank of Ireland and the costs charged by banks to hold our members savings on deposit are the main contributory factors for the introduction of a saving cap.
Under Central Bank regulations, we must maintain our statutory capital at a percentage of our total assets. In practical terms, this means that for every additional €100,000 of savings, we have to allocate €10,000 from our surplus/profits to our Capital Reserve. This greatly impacts our ability to invest in new services and products for our members. It can also negatively impact the amount available to pay a dividend at year end.
Also Negative Interest Rates greatly impact our ability to hold shares over €15,000. The current rate of return offered by banks is still negative. This means every time we lodge money in the Credit Union bank account, interest is not earned, instead the Credit Union is charged a fee by the banks for the holding of these excess funds. Under Central Bank regulation we are obliged to hold a certain amount of savings in liquid funds to meet withdrawals/loans requirements for our members which again incurs a negative interest charge.
What is the saving restriction?
Ballaghaderreen & District Credit Union Limited has capped the amount of savings per member to €15,000.
Does this mean I have to take money out of the credit union now?
The credit union now has a saving cap of €15,000 per member/account. This means that each member can only have €15,000 in shares with the credit union. If anyone currently has over that amount in savings, we would ask that you withdraw the excess funds to ensure your account meets the €15,000 saving restriction. Members who have less than €15,000 can increase their shares to €15,000 – but no more than that.
How long will the cap last for?
The Board continues to keep the savings restriction under constant review, if there is any change to the decision to amend the current saving cap, you will be notified of this.
Are my savings safe here?
Please be assured your savings remain safe and secure at Ballaghaderreen & District Credit Union Limited. We are a financially strong and stable credit union with €3m capital reserves and €20.4m in assets. 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?
Ballaghaderreen & District Credit Union Limited 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 offering great value, flexible loans. If you are in need of a loan please feel free to talk to us about how we can help you, call 094 9860522 alternatively email firstname.lastname@example.org
Thank you for your understanding in this matter. Please be assured that we continue to innovate and work hard to ensure that Ballaghaderreen & District Credit Union Limited remains strong and viable, while offering exceptional personal service, products and services that meet our member needs.